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THE  LIBRARY 

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OF  CALIFORNIA 

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THE    LAW 


OF 


BILLS.  NOTES,  AND  CHEQUES 


THE    LAW 


OF 


BILLS,  NOTES,  AND  CHEQUES 


BY 

MELVILLE  M.  BIGELOW 

PH.D.    HARVARD 


SECOND   EDITION 


BOSTON 
LITTLE,  BROWN,  AND   COMPANY 

1900 


Copyright,  1893,  1900, 
By  Melville  M.  Bigelow, 


T 


^printers 
t>.  J.  I'ARKiiii.L  A  Co.,  Boston,  L'.  S.  A, 


THE   RT.  HON.  SIR   EDWARD   FRY, 

«)METIME    LORD    JUSTICE    OF    APPEAL. 


G6V844 


PREFACE. 


The  law  of  Bills,  Notes,  and  Cheques  has  been  codified 
ill  many  of  the  States  lately,  beginning  in  1897  with  the 
Negotiable  Instruments  Law  of  New  York.  That  has 
made  a  new  edition  of  this  work  necessary. 

The  opportunity  has  been  taken  to  make  certain  im- 
provements of  a  mechanical  nature,  in  aid  of  the  reader. 
The  subject  has  been  broken  up  in  various  places,  and 
the  lines  of  division  made  plainer  to  the  eye.  Side-notes 
have  also  been  added. 

The  New  York  Statute  is  given  in  full  at  the  end  of  the 
book,  and  constant  reference  made  to  it  in  the  text  and 
notes. 

It  is  to  be  regretted  that  the  Statute  is  not  free  from 
avoidable  defects,  and  that  these  defects  have  been  copied 
more  or  less  in  other  States.  The  American  Bar  Asso- 
ciation, which  promoted  the  project  and  framed  the  bill 
for  carrying  it  out,  may  think  it  advisable,  after  a  few 
years'  trial  of  the  present  Statute  shall  have  made  clear 
the  changes  needed,  to  offer  to  the  country  a  new  draft 
of  the  law. 

M.  M.  B. 

Cambridge,  August  2,  1900. 


NOTE. 

The  citation  '  N.  I.  L.,'  or  'The  Statute,'  means  the  Negotiable 
Instruments  Law,  given  at  the  end  of  the  book.  The  citation  '  Cases  ' 
means  Bigelow's  Cases  on  Bills,  Notes,  and  Cheques,  Students'  Series. 


CONTENTS. 


PAG8 

Cases  Cited xv 

CHAPTER  I. 

Law  Merchant 1 

§  1.  Law  Merchant  and  the  Common  Law  :  General  Theory  .  1 

2.  Consideration  :  Grace  :  Negotiability 8 

CHAPTER  n. 

General  Doctrine 11 

§  L  Definitions 11 

2.  Parties • 12 

3.  Delivery      .          . 13 

4.  Essentials  of  Contract :  Defences 17 

5.  Maturity  of  the  Contract 17 

CHAPTER  m. 

Requisites  :  Analysis  of  Definition  . 20 

§  1.  Written  Promise  :  Written  Order  ...,.,..  20 

2.  Necessary  Parties 23 

3.  The  Payee 23 

4.  Money 27 

5.  Certainty  of  Sum 29 

6.  'Absolutely':  Certainty  of  Time 32 

7.  Signature 38 

CHAPTER  IV. 

Maker's  Contract 40 

§  1.  Nature :  Signature 40 

2.  Joint  and  Several  Signature  .     .     •     . 41 

3.  Signing  as  Surety 43 

4.  Signing  as  Agent  or  Representative     . 43 

5.  Anomalous  Signature  of  Stranger 46 


X  CONTENTS. 

CHAPTER  V. 

PAGE 

Acceptor's  Contract 50 

§1.  Acceptance  Proper:  Nature  and  Incidents 50 

2.  Kinds  of  Acceptance  (Proper) 55 

3.  Quasi-Acceptauce 57 

CHAPTER  VI. 

Certifier's  Contract 67 


CHAPTER  Vn. 

Drawer's  Contract , 70 

§  1.  Drawer:  Makei-:  Indorser 70 

2.  Right  to  Draw :  Reasonable  Ground 71 

3.  Drawer  of  Cheque 75 

4.  Presentment  for  Acceptance 79 


CHAPTER   Vin. 

Indorser's  Contract 83 

§  1.  Drawer  and  Indorser:  Definition 83 

2.  Who  may  or  must  Indorse 84 

3.  Partial  Indorsement 89 

4.  Modes  of  Indorsement 90 

5.  Indorsement  as  an  Order  of  Payment 95 

6.  Order  of  Liability 96 

7.  Nature  of  the  Contract 97 

8.  Incidents  of  the  Contract 98 


CHAPTER   IX. 

Indorser's    Contract    Continued  :    Proceedings    before 

Dishonor 105 

§  1.  Presentment  and  Demand  Distinguished:   Mode  of  the 

Steps 105 

2.  Place  of  Presentment 108 

3.  Time  of  Presentment 113 

4.  Presentment,  by  whom 123 

5.  Presentment,  to  whom 126 


CONTENTS.  Xl 
CHAPTER   X. 

PAOB 

Indorser's     Contract     Continued:      Proceedings     upon 

Dishonor 12'J 

§  1.  Protest 129 

2.  Notice  of  Dishonor:  Form 133 

3.  Notice,  by  whom 142 

4.  Notice,  to  whom 145 

5.  Notice,  how 146 

6.  Notice,  when 151 

7.  Notice,  where 157 

8.  Diligence 164 


CHAPTER  XI. 

Indorser's  Contract  Continued  :   Excuse  of  Steps     .     .  165 

§  1.  Temporary  Excuse 166 

2.  Permanent  Excuse  of  both  Presentment  and  Notice    •     .  167 

3.  Excuse  of  Presentment 172 

4.  Excuse  of  Protest 176 

6.  Excuse  of  Notice 177 


CHAPTER  Xn. 

Vendor's  Contract 181 

CHAPTER  Xni. 

Accommodator's  Contract 184 

§  1.  Nature:  Consideration:  Suretyship 184 

2.  Taking  with  Notice 186 


CHAPTER  XIV. 

Assurer's  Contract 188 

§  1.  Annexing  Contracts  of  the  Common  Law:  Guaranty  and 

Suretyship 188 

2.  Guaranty  (in  specific  sense) 189 

3.  Suretyship  (in  specific  sense) 195 

4.  Mortgage 196 


Xll  CONTENTS. 

CHAPTER   XV. 

PAGE 

Holder'8  Position 197 

§  1.  Change  of  Point  of  View:  Strength  of  Plaintiff's  Position  197 

2.  Right  to  Sue  Mediate  or  Remote  Party 198 

3.  Absolute  Defences  and  Equities 200 

CHAPTER  XVI. 

Absolute  Defences 202 

§  1.  Delivery:  Estoppel 202 

2.  Want  of  Contract:   Fraud  in  esse  Contractus     ....  205 

3.  Want  of  Contract:   Alteration:   Forgery  of  Signature: 

Estoppel 206 

4.  Forged  Indorsement 222 

5.  Forged  Signature  of  Drawer,  etc 223 

6.  Incapacity 226 

7.  Illegality :  Instruments  Void  by  Statute 229 

8.  Statutes  of  Limitation 231 


CHAPTER  XVII. 

Equities 232 

§  1.  Bona  Fide  Holder  for  Value,  or  Holder  in  Due  Course    .  232 

2.  Bona  Fide  Holder:  Notice:  Negligence 233 

3.  Holder  for  Value 241 

4.  Equities :  How  Shown :  Their  Nature 250 

5.  Amount  of  Recovery 257 


CHAPTER  XVm. 

Discharge  of  Surety 259 

§1.  Indorser  as  Surety:  The  Statute 259 

2.  Surrender  of  Securities 260 

3.  Agreementfor  Time:  Compositions:  Reservation  of  Rights  260 

4.  Request  to  Sue 266 

5.  Accommodation  Contracts 267 

6.  Agreement  for  Time  with  Stranger 268 

7.  Ground  of  Doctrine 268 


CONTENTS.  Xm 
CHAPTER  XIX. 

PAGE 

Payment 269 

§  1.  General  Rule:  The  Statute:  Presumptive  Payment:  Sur- 
render       26& 

2.  At  the  Right  Time 274 

3.  To  the  Right  Person 274 

4.  By  the  Right  Person 275 

5.  Payment  for  Honor 276 

CHAPTER  XX. 

Conflict  of  Laws 278 

§  1.  General  Doctrine 278 

2.  Maker  or  Acceptor 279 

3.  Drawer  or  Indorser 282 

4.  Procedure  and  Remedy 284 


NEGOTIABLE  INSTRUMENTS  LAW 285 

INDEX 823 


CASES    CITED. 


A. 

PAOB 

Abel  0.  Sutton 88 

Adams  v.  Blethen 93 

V.  Frye 210 

V.  King 24 

^tna  Ins.  Co.  v.  Winchester     .  216, 217 

Akers  v.  Demond 281 

Akin  V.  Jones 50 

Alabama  Bank  v.  Rivers       .     .     .  242 

Albertson  v.  Laughlin      ....  30 

Aldous  V.  Cornwell 208 

Aldrich  V.  Smith 207 

Alexander  v.  Burchfield  ....  79 

Allaire  v.  Hartshorne 258 

Allen  V.  Brown 263 

V.  Clark        182 

J7.  Kemble 284 

■c.  King 74 

V.  Leavens 65 

V.  Merchants'  Bank  ....  282 

Alvey  V.  Reed 226 

American  Bank  v.  Blanchard    .     .  34 

V.  Gluck 52,  229,  239 

V.  Junk 158,  160,  180 

American  Co.  v.  Bowen  ....  227 

Anderson  v.  Drake 109 

Andrew  v.  Blackly 76 

Andrews  v.  Boyd 170 

V.  Franklin 36 

V.  German  Bank 69 

Angle  V.  Northwestern  Ins.  Co.   255, 256 

Arbuckle  v.  Templeton     ....  42 

Armour  Banking  Co.  v,  Eiley  Bank  240 

Armstrong  v.  Armstrong      ...  41 

V.  Christiani 137 

V.  National  Bank 26 

V.  Thurston 141 

Arnold  v.  Cheque  Bank    .    15,  204,  218, 

220,  222 

»,  Dresser    .     .     106,  108,  127,  173 

V.  Kinloch 141 

Amot  I'.  Woodburn     .....  256 


f-AGB 

Arpin  v.  Owena 52 

Ashcroft  V.  De  Armond  ....  227 
Atchison  Bank  v.  Garretson  .  .  58 
Atkinson  v.  Brooks  .  .  248,  249,  264 
Attorney-Gen.  v.  Continental  Ins. 

V>0.       ..........  Od 

Attwood  V.  Rattenbury    ....      88 

Auerbach  v.  Pritchett 27 

Austin  V.  Curtis      .    .    .   247,  249,  265 

Averett  v,  Booker 32 

Aj'er  V.  Tilden 281 

Aymar  v.  Sheldon 80,  282 


B. 


Bachelder  v.  White 207 

Backus  V.  Shipherd 175 

Bailey  v.  Dozier 133 

V.  Smith 257 

Baker  v.  Stone 22tJ 

Ballon  V.  Talbot 45 

Banbury  ?\  Lisset 33 

Bange  v.  Flint 257 

Bank  v.  Layne 97 

V.  Looney 44,  238 

V.  Michael 238 

V.  Nordgen  .......      48 

V.  Payne 48 

V.  Penland 239 

V.  Sneed 272 

V.  Stockell 239 

Bank  of  Alexandria  v.  Swann    135,  151 
Bank  of  America  v.  Shaw    .    .  158,  160 

V.  Woodworth 221 

Bank  of  Columbia  v.  Lawrence      .    164 
Bank  of  Commerce  v.  Union  Bank     98, 

215,  223 
Bank  of  England  v.  Vagliano   .    15,  26, 

204 
Bank  of  Ireland  v.  Evans  Charities     15, 

218 


XVI 


CASES   CITED. 


PAQE 

Bank  of  Jamaica  v.  Jefferson  .  .  48 
Bank  of  New  York  v.  Vanderliorst  249 
Bank  of  Old  Dominion  v.  McVeigh  134, 
160,166,171,  177 
BankofRedOakt).  Orvis  ...  127 
Bank  of  Republic  v.  Carrington     .     245 

V.  Millard 50 

Bank  of  United  States  v.  Bank  of 

Georgia 226 

I'.  Carneal 142 

V.  Daniel 11,  131 

V.  Davis 150 

V.  Dunn 104 

Bank  ofUtica  v.  Bender     112,  154,  163, 

164 

V.  Phillips 160,  161 

Bank  of  Washington  v.  Triplett    .      80 

Bankhead  v.  Owen 182 

Banks  v.  McCosker 252 

Barclay  v.  Bailey 122 

Bardsley  v.  Delp 244 

Barlow  i'.  Bishop 98 

V.  Congregational  Society  .    45,  46 

Barnwell  r.  Mitchell 164 

Barron  v.  Cady 267 

Bartlett  v.  Leathers 117 

V.  Wells 226 

Barton  v.  Baker  ....  126,  178 
Bassenhorst  v.  Wilby  115,  116,  157,  175 
Bassett  v.  Avery 257 

V.  Haines 55 

Baxendale  v.  Bennett      13,  14,  15,  203, 

204 
Baxter  v.  Duren 182 

V.  Little 256 

Bay  V.  Coddington 244 

V.  Shrader 221 

Bayard  v.  Shunk 182 

Bayer  v.  Richardson 240 

Bayley  v.  Taber 230 

Beacon  Trust  Co.  v.  Robbins       261,  262 

Beale  v.  Parrish 165 

Beals  V.  Peck 145 

Bean  v.  Arnold 168 

Beard  v.  Dedolph 39,  85 

V.  Westerraan 170 

Beardslej'  v.  Hawes 115 

V.  Webber 22 

Beattie  v.  National  Bank  ...  86 
Beatty  v.  Western  College  .  .  30,  238 
Bedell  v.  Herring    ....      198,  251 

Beecher  v.  Dunlap 16 

Belcher  v.  Smith 93,  194 


PASS 

Belknap  v.  National  Bank    .     .    .  217 

Bell  V.  Alexander 77 

V.  Cafiferty 182 

V.  Dagg 181,  182,  183 

Benedict  v.  Cowden 221 

Benoist  v.  Creditors 74 

Benthall  v.  Hildreth 221 

Benton  v.  Martin 16 

Berg  V.  Abbott 108 

Berkeley  v.  Tinsley     .....  253 
Berkshire  Bank  v.  Jones  .     .      175,  177 

Berney  v.  Steiner 86 

Berridge  v.  Fitzgerald      ....  160 

Berry  v.  Robinson 157 

Bertrand  v.  Barkman 244 

Beuerman  v.  Van  Buren  ....  245 

Bevan  v.  Eldridge 18 

Bickford  v.  First  National  Bank    .  69 

V.  Gibbs  ........  191 

Bigelow  V.  Colton 48,  104 

Bikerdike  v.  BoUmau 72 

Bird  V.  Le  Blanc 169 

Birmingham  Bank  v.  Bradley  ,     .  98 

Bishop  V.  Dexter 157 

V.  Young 8 

Bissell  V.  Lewis 53 

Bissenthall  v.  Williams   ....  23 

Black  V.  Bachelder 38 

V.  Ward 28 

Blackmore  v.  Granberg   ....  97 

Blaine  v.  Bourne 240 

Blair  v.  Hoge 248 

Blakely  v.  Grant 194 

Blakey  t',  Johnson       .     .     .     .209,256 

Blanckenhagen  v.  Blundell  ...  24 

Bliss  V.  Johnson 38 

Blodgett  V.  Durgin 112 

Blue  Springs  Mining  Co.  v.  Mcll- 

vien 239 

Bond  V.  Farnham 170 

Booth,  In  re 41 

V.  Powers 214 

Born  V.  First  National  Bank     .     .  69 

Bouldin  v.  Page 145 

Boulton  V.  Walsh    ......  137 

Bower  v.  Hastings 253 

Bowling  V.  Harrison    ....  147, 1 50 

Boyd  V.  Cummings 249 

V.  McCann .  257 

Boyer  v.  Chandler 10 

Bradlaugh  v.  De  Rin    .     .     .     .280,281 

Bradley  V.  Lill    .......  31 

Braithwaite  v.  Gardiner  ....  98 


CASES   CITED. 


xvii 


PAGE 

Bray  v.  Hadwen 156, 157 

Bridges  v.  Winters 208 

Brill  V.  Crick 221 

Britton  v.  Dierker 209 

Brooker  v.  Stackpole 49 

Brooklyn  R,  Co.  v.  National  Bank    245 
Brooks  V.  Allen  ...    209,  216,  217 

V.  Blaney 110,  111 

V.  Elkins 22 

V.  Hargreaves  ......       31 

V.  Mitchell 240 

Brown  v.  Bank  of  Abingdon     .     .    147 
V.  Butchers'  Bank    .    21,  38,39,  86 

V.  Donnell 229 

V.  Hull 169 

V.  Leavitt .249 

V.  Maffey .7^ 

V.  McHugli 39,  85 

V.  Olmsted 249 

V.  Reed 214,  221 

Bryant  v.  Wilcox 168 

Buchanan  v.  Wren      .     .      30,  175,  238 

Buck  V.  Wood 226 

Buckner  v.  Finley 11,  131 

Buddeeke  v.  Alexander   ....     182 

Bull  V.  Bank 28 

Burchfield  V.  Moord      .     .     .     .209,213 

Burgess  v.  Nash ,        8 

Burke  v.  Allen 227 

V.  McKay 125,  126 

Burkhalter  v.  Second  Nat.  Bank   78,  79 

Burley  v.  Russell 226 

Burmester  v.  Barron 163 

Burns  v.  Rowland 248 

Burrows  v.  Klunk 220 

Burson  v.  Huntington    13,  14,  203,  204, 

256 

Burton  v.  Slaughter 185 

Butler  V.  Paine .      28 

Byrne  v.  Becker      ......    248 


c. 

Cabot  Bank  v.  Morton      ....    182 

Came  v.  Brigham 228 

Cameron  v.  Chappell 239 

Campbell  v.  Hoff 252 

Canal  BanK  v.  Bank  of  Albany    .     222 
Capital  BanK  v  American  Bank  116, 117 

V.  Armstrong 218 

Capron  v.  Capron 37 

Carew  v.  Duckworth  ...    75,  76,  77 


FAOB 

Carlon  v.  Kenealy 19,  31 

Carlton  v.  White     .     .     . 

.     .    180 

Carnwright  v.  Gray     .     . 

8 

Carpenter  v.  Farnsworth  . 

.       24 

V.  Longman      .    .     . 

.     196 

V.  Rej'nolds      .    .     . 

.     169 

Carr  v.  Rowland      .     .     . 

.       47 

Carrier  t'.  Sears  .... 

.    227 

Carroll  v.  Sweet      .    .    . 

.      77 

V.  Upton      .... 

.     164 

Carter  v.  Burley     .    .    . 

.     132 

V.  Moulton  .... 

.       14 

V.  Union  Bank      .     . 

.     125 

Caruthers  v.  West  .     .     . 

.     253 

Casco  Bank  v.  Shaw    .    . 

.  158, 160 

Case  V.  Spaulding  ,     . 

.  103, 104 

Castle  V.  Rickey      .     .     . 

.     .       97 

Catlett  V.  Catlett     .     .     . 

.       41 

Caulkins  v.  Whisler     .     . 

,     206 

Central  Bank  v.  Allen 

.     108 

V.  Hammett      .     .     . 

.    271 

V.  Richards       .     .     .63,  64,  65,  66 

Central  Trust  Co.  v.  National  Bank    194 

Chaddock  v.  Vanness 103 

Chadwick  v.  Jeffers     .     . 

157 

Chamberlain  v.  Young 

,      84 

Chandler  v.  Drew    .     ,     . 

256 

Chanoine  v.  Fowler     .     .    , 

142 

Chapman  v.  Keane      .     . 

.     143 

V.  Rose 

203 

Chappell  V.  McKeough    . 

272 

Charles  v.  Denio     .     .    . 

104 

V.  Marden    .... 

253 

Charlton  v.  Reed    =     .    . 

207 

Chase  Bank  v.  Faurot 

10 

Chatham  Bank  v.  Allison 

282 

Cheever  v.  Pittsburgh  R.  Co 

236,  237 

Cheshire  v.  Taylor  .     .     . 

.     170 

Chester  t'.  Dorr 

187,  253 

Chicago  Ry.  Co.  v.  Mercliant 

"'  T 

Jank    31 

Chicopee  Bank  v.  Cliapin     . 

.     258 

V.  Philadelphia  Bank 

106, 107 

Child  V.  Powder  Works  .     . 

,     186 

Childs  V.  Laflin 

112 

Chipman  v.  Tucker 

14 

Chism  V.  Bank   .     . 

26 

V.  Toomer     .     . 

214 

Chouteau  v.  Allen  . 

239 

V,  Webster  .     . 

161 

Church  V.  Barlow   .     . 

156 

Cincinnati  R.  Co.  v.  Bank    . 

50 

Citizens'  Bank  v.  Jones   .     . 

104 

V.  Richmond    .     . 

•         • 

213 

XVUl 


CASES   CITED. 


PAGE 

Citizens'  Bank  v.  Walton     .    .   89,  104 

V.  Williams 207,  210 

City  Bank  v.  Cutter  ....  125, 132 
Clapp  t'.  Hanson 102 

V.  Rice 48 

Claridge  v.  Daltou 74 

Clark  V.  Eldridge 141 

V.  Jones 196 

V.  Pease 251,  253 

V.  Whiting 95 

Clarke  v.  Patrick 104, 181 

Clerke  v.  Martin 4 

Clews  V.  Bank  of  New  York     .     .    215 

Cline  V.  Guthrie 206 

Clouston  I'.  Barbiere 47 

Clute  V.  Small 208 

Clutton  V.  Attenborough  .     .  .26 

Cochran  v.  Atchison 86 

Cocke  r.  Bank  of  Tennessee  .  .  146 
Cockrill  v.  Kirkpatrick  ...  27,  28 
Coddington  v.  Davis  .  .  169,  170,  177 
Coffman  v.  Bank  of  Kentucky  ,     ,     283 

V.  Campbell 33 

Coggill  V.  American  Bank    .     .   98,  223 

Cohen  v.  Teller 226 

Coleman  v.  Ewing  .....     18,  43 

Collins  V.  Manville 284 

Collott  V.  Haigh 268 

Colms  V.  Bank  of  Tennessee  .  .  132 
Commercial  Bank  v.  Varnum    .     .     131 

Comstock  V.  Hier 244 

Cony  V.  Wheelock 88 

Cook  V.  Baldwin 55 

V.  Lister 275,  276 

Coolidge  V.  Brigham 181 

V.  Payson  ....  53,  64,  65,  66 
Cooper  I'.  Waldegrave  ....  284 
Corbett  v.  Clark 33 

V.  Fetzer 91 

Corbin  v.  Planters'  Bank      .    .  132, 279 

Corby  v.  Weddle 203 

Corn  Exchange   Bank  v.   Nassau 

Bank 227 

Cornell  v.  Nebeker 221 

Cottrell  V.  Walkins      ....  253,  275 

Coulter  V.  Richmond 47 

Course  v.  Shackleford      ....     157 

Coursin  i\  Ledlie 33 

Covert  V.  Rhodes 50 

Cowing  V.  Altman 241 

Crandall  v.  First  National  Bank  .  210 
Crawford  v.  Aultman 196 

V.  Branch  Bank 140 


PAoa 
Crawshay  v.  Collins    ......      87 

Creamer  v.  Perry    ......     171 

Crim  V.  Starkweather 36 

Crist  V.  Crist 87, 124 

Cristy  v.  Campau 201 

Crocker  v.  Gatchell 1 57 

V.  Getchell  ..,.,..    141 

Cromer  v.  Piatt 140 

Cromwell  v.  Sac  County  .    240,  256,  257 

Cronkhite  v.  Nebeker 207 

Crosby  v.  Grant       ......     241 

V.  Ritchey 198, 19!) 

V.  Wright 98 

Crout  V.  DeWolf 226 

Culbertson  v.  Nelson 31 

Cummings  v.  Boyd 244 

Currie  v.  Misa 245 

i;.  Nind 242 

Currier  v.  Lockwood    ....     21,  22 

Curtis  V.  Brown 59 

V.  Goodenow 208 

V.  Leavitt 228 

V.  Mohr 250 


D. 

Dabney  v.  Stidger 146 

Dale  t'.  Gear 98,  103,  104 

Dana  v.  National  Bank  of  Repub- 
lic     223 

V.  Sawyer 121 

Davis  V.  Brown 104 

V.  Clarke 51, 291 

V.  McCready 239 

V.  Miller 274 

r.  Reilly 269 

Deardorff  v.  Forseman      .     .     .  197,  233 

Deblieux  v.  Bullard 155 

Decker  v.  Franz 210 

Deininger  v.  Miller 145 

Denison  v.  Tyson 28 

Dennie  v.  Walker 18,  43 

Dennistown  v.  Stewart     ....     133 

Develiug  v.  Ferris 170 

Dewey  v.  Washburn    .....      28 

DeWitt  V.  Walton 45 

DeWolf  V.  Murray 140 

Dey  V.  Martin 261 

Dickens  v.  Beal 72,  74 

Dickinson  v.  Edwards      .     .     .  281, 28;> 

Dietrich  v.  Bayhi 30 

Dodge  V,  Emerson  ......      29 


CASES   CITED. 


XIX 


PAGE 

Dodge  V.  Freedmen'g  Savings  Bank 

Co 272 

Dodson  V.  Taylor 134, 145 

Dole  V.  Gold 141 

Donegan  v.  Wood 125 

Doolittle  V.  Ferrj' 104 

Doom  V.  Sherwin 104 

Doppett  V.  National  Bauk     ...      83 
Douglas  V.  Bank     .     .     .   130,  140,  282 

Douglass  V.  Wilkeson 89 

Downer  v.  Cheseborougli      .     .     .     103 

V.  Remer 159 

Drake  t;.  Henly 102 

V.  Markle 28 

Draper  v.  Massachusetts  Heating  Co.   46 

V.  Ward  .     .     .     207,  212,  213,  214 
Dresser  v.  Missouri  Const.  Co.  .     .     254 

V.  Missouri  Ry.  Co.    .     .     .  257,  258 

Duerson  v.  Alsop 198 

Dugan  V.  United  States  ...    85,  199 

Dunavan  v.  Flynn 60,  01 

Dunbar  v.  Tyler 166 

Duncan  v.  Gilbert 252 

V.  McCullough 112 

Dundas  r.  Bowler 283 

Dunham  v.  Patterson 194 

Dunlop  V.  Silver 3,  4,  8 

Dunn  V.  Adams 282 

Durden  v.  Smith 166 

Durland  v.  Durland 8 

Duvall  V.  Farmers'  Bank     .    .    .    168 
Dyer  v.  Rosenthal 245 


E. 

Eagle  Bank  v.  Hathaway     .    .    .  148 

Early  v.  Wilkinson 46 

Eaton  V.  McMahon 104 

Ecfert  V.  Des  Coudres       ....  157 

Edmund  v.  Digges 182 

Edwards  v.  Jones 258 

V.  Thomas    .......  162 

V.Walters 270 

Eigenbrun  v.  Smith 247 

Filbert  v.  Finkbeiner 47 

Elgin  Banking  Co.  v.  Zelch      .    .  94 

Ellis  V.  Ohio  Ins.  Co 225 

Elwell  V.  Tatum 257 

Emmons  v.  Meeker 209 

English  Bank,  In  re    ....    .  61 

V,  Rice o  66 

Equitable  Ins.  Co.  v.  Adams     .    .  104 


FAOB 

Erwin  v.  Downs      .... 

.    .  98,  101 

Espy  V.  Ross 

.     .    .        0 

Essex  Bank  v.  Russell      . 

.     .     .    249 

F^itabrook  v.  Smith      .     . 

.     .       87 

Estes  V.  Tower   .... 

.      18,  4.'; 

Etheridge  v.  Ladd  .     .     . 

.     .     108 

Etting  V.  Schuylkill  Bank 

.     .     141 

Evans  v.  Underwood    .     . 

.     .      36 

Kverard  v   Watson       .     . 

.    .     137 

Everett  v.  Vendryes    .     . 

.     280 

Ewan  V.  Brooks-Waterfield  Co.     48,  84, 

Exchange  Bank  v.  Bayless 

.261,  262 

I'.  Rice 

.     .     .      65 

Fairchild  v.  Ogdensburgh     ...      75 

Fales  V.  Russell 172 

Falk  V.  Moebs 25,  44,  89 

Fant  V.  Miller 279 

V.  Wickes 19,  31,  238 

Farmers'  Bank  v.  Allen  ....  130 
V.  Butchers'  Bank  ...  68,  227 
V.  Gunnell  ....  119, 164, 166 
V.  Rathbone      ...      43,  268,  276 

V.  Sutton  Co 30 

r.  Van  Meter 71 

Farnsworth  v.  Allen 122 

V.  Mullen 151 

Farrell  v.  Lovett 241 

V.  Reed 44 

Farrington  v.  Sexton 247 

Fenonille  v.  Hamilton       ....     244 

Fentum  v.  Pocock 268 

Ferris  v.  Tavel 238 

Fielding  v.  Corry 118, 147 

First  National  Bank  v.  Buckhannon 

Bank 77 

V.  Farmers'  Bank 26 

V.  First  National  Bank  .     .   98,  225 

V.  Forsyth 239 

V.  Gay 30 

V.  Green 198,  252 

V.  Hall 25,  89 

V.  Leach 69 

V.  McAllister 245 

r.  McKibben 198 

V.  Miller 79 

V.  National  Marine  Bank  .  .  103 
V.  Northwestern  Bank  .  .  22.5,  226 
V.  Ricker 225 


XX 


CASES   CITED. 


FAOS 

First  National  Bank  v.  Rohrer .    .    196 

V.  Wallis 44 

r.  Whitman 69 

V.  Wood 255 

Fisher  v.  Fisher 245 

r.  Rieman 182 

Fletclier  v.  Blodgett 221 

1-.  Chase 249 

Flint  V.  Rogers  .......      18 

Foard  v.  Womack 72,  74 

Fogg  V.  Sawyer  .......     182 

Foley  ('.  Emerald  Brewing  Co.       .       36 

Foltz  v.  Pourie 88 

Foot  V.  Carter     .......       52 

Fordj'ce  v,  Kasminski      ....    220 

Foster  v.  Julien  ....    112, 174, 178 

V.  Mackinnon  ....  14,  55,  206 

V.  Parker 172, 178 

Fourth  Street  Bank  v.  Yardley      .      50 

Fowler  v.  Strickland 257 

Fox  V.  Citizens'  Bank      ....     238 

Fralick  v.  Norton 29 

Frank  v.  Wessels 27 

Franklin  Sav.  Inst.  v.  Reed  ...    221 

Frazer  v.  Jordan 268 

Freeman  v.  Bailey 238 

V.  Boynton Ill 

V.  Brittin 102 

r.  O'Brien 168,169 

Freeman's  Bank  v.  National  Tube 

Works ,.     .     240 

Frontier  Bank  v..  Morse    ....    182 

Fry  V.  Hill 114 

Fugitt  V.  Nixon 155 

Fuller  V.  Hooper 45 

V.  Thorne 2 

Funk  V.  Babbitt 23,  51 

Furze  v.  Sharwood  .     .     .    136, 137, 142 


G. 

Gage  Hotel  Co.  v.  Union  Bank     50,  73, 

75,  83 

Gale  t'.  Browne 3 

Gardner  v.  Walsh 210 

Garr  v.  Louisville  Banking  Co.    .      30 
Garrard  v.  Haddan      .....    214 

Gates  V.  Beecher 127 

Gawtry  v.  Doane 160, 163 

Gaylord  v.  Nebraska  Bank  .     .    85,  94 

Geary  v.  Physic 21,  38 

George  v.  Surrey 39 


PA  OS 

Gerrish  v.  Glines 221 

Gettysburg  Bank  »,  Chisholm  .  207, 209 

Gibbs  V.  Fremont 284 

V.  Linabury 203,  205 

Gibson  v.  Connor 245 

V.  Tobey 250 

Gifford  V.  Hardell 79 

Gilbert  v.  Dennis 139 

Gilchrist  v.  Donnell 162 

Gill  V.  Cubitt 235 

Gillespie  v.  Cammack 74 

Gilmore  v.  Ham 87 

Gist  V.  Lybrand 112, 174 

Givens  v.  Merchants'  Bank  .  .  .  170 
Gladwell  v.  Turner  ....  154, 155 
Glidden  v.  Chamberlain    .     98,  99,  167, 

169,  170 

Glober  v.  Bobbins 209 

Gomersall,  In  re 257 

Good  «).  Martin 47 

Goodell  V.  Bates 226 

Goodenow  v.  Curtis 208 

Goodman  v.  Harvey 235 

V.  Simouds       236 

Goodnow  V.  Warren  ....  145, 146 
Goshen  Bank  v.  Bingham  ...  85 
Goshen  Turnpike  v.  Hurtin  ...       38 

Gough  V.  Staats 79 

Gould  V.  Robson 264 

Goup3'  V.  Harden    ......     114 

Gove  V.  Vining 168 

Gowan  v.  .Jackson 145 

Gower  v.  Moore  ....  120, 126, 176 
Grafton  Bank  v.  Wing     ...      44,  46 

Graham  v.  Adams 27 

Grant  v.  Ellicott 252, 254 

V.  Hunt 65 

7'.  Vaughan 4 

V.  Walsh 251, 252 

V.  Wood 36 

Gray  v.  Bell 157 

Greelej'  v.  Thurston 18 

Green  v.  Shepherd  .  .  .  .48,  191 
Greenfield  Bank  v.  Stowell  .  213,  217,, 
219,220,  221,  256 
Greenough  v.  Smead  ....  48, 127 
Greenville  Bank  v.  Stowell .    .    .    217 

Gregg  V.  Beane 79 

Griffin  v.  Kemp 77 

V.  Weatherby 33 

Grimshaw  v.  Bender 11 

Grocers'  Bank  v.  Penfield  .  .  .  248 
Grosvenor  v.  Stone 74 


CASES   CITED. 


XXI 


FAGB 

Grugeon  v.  Smith 137 

Grumbach  v.  Hirsch 52 

Gumz  V.  Giegling 40 

Gurney  v.  Womersley      ....  182 


H. 


Hagey  v.  Hill 262,  2G6 

Haines  v.  Dennett 102 

Hale  V.  Burr  .....  120, 175, 178 
Halifax  Union  v.  Wheelwright  .  220 
Hall  V.  Bradbury 127 

V.  First  National  Bank  .     .      17,  40 

V.  Newcomb 47, 193 

Hallowell  Bank  v.  Marston  ...  167 
Hamilton  v.  Hooper 210 

V.  Spottiswoode 23 

Hamlyn  v.  Talisker  Distillery  278,  279, 

281 
Hapgood  V.  Wellington  ....  186 
Harbeck  v.  Vanderbilt     ....     272 

Hare  v.  Heaty 124 

Harker  17.  Anderson 114 

Harley  v.  Thornton 182 

Harmer  v.  Steele 271 

Harness  v.  Davies 72 

V.  Davies  Sav.  Assoc.    ...       73 

Harrah  v.  Dohertj' 92 

Harrington  v.  Stratton  ....  200 
Harris  v.  Clark 127 

V.  Memphis  Bank  ....  161 
Harrison  v.  Courtauld      ....     208 

V.  McKim 6,  104 

V.  Ruscoe 144 

Hartley  v.  Case 136 

Hartzell  v.  McClurg 272 

Harvey  V.  Harvey 208,210 

V.  Smith 221 

Hascall  v.  Whitmore  ....  250,  257 
Haskell  v.  Champion 210 

V,  Lambert 34 

Hastings  v.  Thompson     ....       31 

Hatch  V.  Barrett 93 

Hately  v.  Pike 25,  44,  89 

Hawkes  v.  Phillips 191 

Hawkins  v.  Graham 38 

V.  Watkins 27 

Hazard  v.  Spencer 109, 252 

Hearne,  Ex  parte 243 

Hedger  v.  Steavenson      ....    137 

Heidelback,  Ex  parte 281 

Heist  V.  Hart 17,  40 


PAOB 

Helmer  v.  Krolich 30,  37 

Henrietta  Bank  v.  State  Bank  .  57,  65 
Henshaw  i;.  Dutton      ....     16,  17 

Herbage  v.  McEntee 47 

Hersey  v.  Elliot 87 

Herter  v.  Goss  &  Edsall  Co.  .  .  51 
Heurtematte  v.  Morris  ....  52 
Heywood  v.  Perrin 221 

V.  Pickering  .....  11,  77 
Hibernia  Bank  v.  Lacombe  .     .    .    281 

Higgins  V.  Kidgway 16 

Hildreth  v.  Shepard 284 

Hitchcock  I'.  Frackelton  •  .  .  104,  267 
Hitchings  v.  Edmands  ....  36 
Hoffman  v.  Bank 52 

V.  Smith 74 

Hogue  V.  Davis 92 

Holcomb  V.  Wyckoff 258 

Holden  v.  Plia>nix  Rattan  Co.  .    .    252 

Holland  v.  Cruft 247 

Holman  v.  Hobson 258 

Holmes  v.  Roe 79 

V.  Trumper   209,  213,  218,  219,  220, 

221 

V.  Williams 230 

Hopkins  v.  Adams 172 

V.  Halliburton 24 

Hopkirk  v.  Page 72 

Home  ».  Redf earn 22 

V.  Rouquctte 282,  283 

Horst  V.  Wagner 211 

Horton  v.  Butlinton 230 

Hortsman  v.  Henshaw     .     .     .  215,  222 

Hosier  v.  Beard 227 

Hotel  Lanier  v.  Johnson  ....  36 
House  V.  Adams 81 

V.  Kountze 50 

Housum  V.  Rogers 250, 

Howard  v.  Ives 151 

Hoyt  V.  McNally 8 

Hubbard  v.  Matthews       ....     146 

V.  Mosely 30,  37 

Hubble  V.  Murphy 16,  17 

Humphreys  v.  Gwillow  .  .  .  209, 214 
Humphries  v.  Chastain     ....      88 

Hunlerth  v.  Leahy 256 

Hunt  V.  Gray 214 

V.  Hall 281 

V.  Ma3'bee 125 

V.  Standart 282 

Hurste  v.  Barnyes  ......        3 

Husband  v.  Epling 35 

Huse  V.  Hamblia 282 


xxu 


CASES   CITED. 


FJkOB 

Hussey  v.  Sibley    ......    182 

Hutchison  v.  Crutcher     ....    108 

Hyslop  V.  Jones •    158 


I. 

Illinois  Conference  v.  Plegge     .     .  44 

Industrial  Trust  Co.  v.  Weakley    .  79 

Ireland  v.  Kip 160 

Iron  City  Bank  v.  McCord   ...  32 

Iron  Mountain  Bank  v.  Murdock  .  218 

Irvine  v.  Lowry 27 

Irving  Bank  v.  Wetherald    .     .     52,  69 

Iser  V.  Cohen 104 

Isnard  v.  Torres 218 

J. 

Jacobs  V.  Benson 24 

V.  Gilreath 214 

Jaffrey  v.  Cornish 250 

James  v.  Hackley 249 

Jarnagin  v.  Stratton 145 

Jefts  V.  York 45 

Jenkins  v.  Coomber 47 

Jenkinson  v.  Wilkinson   ....  85 

Jennings  v.  Neville 242 

Jewell  V.  Parr 253 

V.  Wright 283 

Johnson  v.  Cleaves 250 

V.  Frisbie 31 

V.  Heagan 221 

V.  Johnson 210 

Jones  V.  Bank  of  Iowa      ....  Q5 

V.  Broadhurst 275 

V.  Fales 28 

V.  Gordon 236,  257 

V.  Heiliger 78 

V.  Thorn 87 

V.  Wardwell     ......  149 

V.  Wiesen 257 

Jordaine  v.  Lashbrooke    ....  101 

Jordan  v.  Jordan 197 

JuniaXa  Bank  v.  Hale  .    .    .      134,  171 

K. 

Kahn  v.  Watkins 26 

Kearslake  v.  Morgan 269 

Kearsley  v.  Cole 263 

Keene  v.  Aldrich     ,,.,..  214 


Keene  v.  Beard  .  *  . 
Keith  V.  Goodwin  .  . 
Kelley  v.  Hemingway 

V.  Whitney  . 
Kellogg  V.  Barton   .     . 

V.  Steiner  .  .  = 
Kelly  V.  Brooklyn  .  . 
Kemble  v.  Mills  .  . 
Kendrick  v.  Lomax 
Kenicot  v.  Wayne  .  . 
Kennedy  v.  Lancaster  Bank 

V.  Thomas  .  .  • 
Kenny  v.  Walker  .  . 
Keokuk  Bank  v.  Hall . 
Kern's  Estate  .  . 
Kilgore  v.  Jordan  .  . 
Kimball  v.  Huntington 
King  V.  Crowell .     .     108, 

V.  Uoolittle  .    .     . 

V.  Hoare  .... 
Kinsley  v.  Robinson  . 
Kinyon  v.  Stanton  .  . 
Kirkpatrick  v,  Puryear 
Kirkwood  v.  First  National 

V.  Smith  .... 
Kirtland  v.  Wanzer  , 
Knight  V.  Pugh  .  .  . 
Koons  V.  Davis  .  .  , 
Kountz  V.  Kennedy  , 
Klauber  v.  Biggerstaff 
Kramer  v.  Sandford 
Krause  v.  Meyer  .  , 
Kulenkamp  v.  Groff    . 


PAOB 

76,  77,  83 

.    210 

.      32 

.     240 

187,  253 

14,  203 

33 


110 


77 
264 
196 
209 
18,  42 
252 
244 
242 
226 
21 
151,  173 
244 
42 
74 
77,  78 
77,79,269 
Bank .      10 
.      35 
.    132 
.    252 
.     226 
.     212 
22,27 
170,  171 
.    211 
.     104 


L. 

Labbee  v.  Johnson 16 

Lafitte  r.  Slatter 74 

Lamar  ?'.  Brown 209 

Lambert  v.  Ghiselin 165 

Lancaster  Bank  v.  Garber    .     .    .    236 

V.  Moore 272 

V.  Taylor 39,  35 

Landon  v.  Bryant   ....       115,  157 

Landry  v.  Stansberr}' 176 

Lane  v.  Bank  of  West  Tennessee  166, 172 

V.  Steward 175 

Langenberger  v.  Kroeger      .     .     .    216 
Langton  v.  Lazarus      .....     216 

Lawrence  v.  Miller 164 

Lawson  v.  Farmers'  Bank   153,  154,  156 
Laxton  v.  Peat 268 


CASES  CITED. 


ZXIU 


PAOB 

Lay  V.  Wissman     ....      257,  258 

Leary  v.  Blanchard 240 

Leather  Manuf.  Bank  v.  Morgan  .  223 
Leavitt  v.  Putnam  ....       115,  253 

Lebel  v.  Tucker 280 

Le  Breton  v.  Pierce 245 

Ledwick  v.  McKim 25G 

Lee  V.  Smead 244 

Leftley  v.  Mills 133 

Legg  V.  Vinal 132 

Leggett  V.  Raymond 193 

Lehman  v.  Jones     .     .     .   112,  174,  178 

V.  Press 44 

Lennon  v.  Grauer 98, 101 

Leonard  v.  Wilkes .  .  .  r  .  .  191 
Lewis  V.  Brehme 169 

V.  Monahan 48 

Light  V.  Kingsbury 115 

Limerick  Bank  v.  Adams     198,  235,  252 

Linderman  v.  Guldin 146 

Lindo  V.  Unsworth  ....       118,  151 

Lindsay  v.  Price 89 

Liukhous  V.  Hale 132 

Littauer  v.  Goldman  .....  181 
Little  V.  Phenix  Bank       ...     27,  77 

V.  Slackford 23 

Lochnane  v.  Emerson 209 

Lock  wood  V.  Crawford     .  .    .     141 

Loewen  v.  Forsee 244 

Logan  V.  Smith 250 

London  Bank  v.  Bank  of  Liverpool  52, 

223 
Lookout  Bank  v.  Aull  16,  25,  89, 197,  233 

Loos  V.  Wilkinson 247 

Lowe  V.  Bliss 31 

Lowery  v.  Scott 164 

Lunt  V.  Adams 123 

V.  Silver 210 

Lynchburg  v.  Slaughter  ....  257 
Lyndonville  Bank  v.  Fletcher  225,  226, 

272 
Lysaght  v.  Bryant 144 


M. 


Maddox  v.  Duiican  ....  231,  269 
Madison  R.  Co.  v.  Norwich  Society  228 
Madison  Square  Bank  v.  Pierce     .     275 

MaiTat  v.  Greene 187 

Magee  v.  Carmack 183 

Magoun  ??.  Walker 132 

Magruder  v.  Union  Bank      .       134,  171 


PAGB 

Maguire  v.  Eichmeier 269 

Main  v.  Lynch 247 

Maitland  v.  Citizens'  Bank  .  .  .  248 
Maiden  Bank  v.  Baldwin  .  110,  111 
Manchester  Bank  v.  Fellows  150,155, 157 
Manley  v.  Geagan   .....     58,  59 

Manrow  v.  Durham 193 

Marden  v.  Babcock 243 

Marine  Bank  v.  National  City  Bank  225 
Marine  Manuf.  Co.  v.  Bradley  .     .      10 

Marion  v.  Clark 256 

Markey  v.  Corey 93,  94 

Marrett  v.  Equitable  Ins.  Co.    .    .      29 

Marsh  v.  Burr 160 

V.  Griftin 209 

Marshall  v.  Mitchell 170 

Martin  v.  Bank 244 

V.  Lewis 104 

Mason  v.  Franklin 80, 109 

V.  Pritchard 164 

Mathewson  v.  Strafford  Bank  .  .  146 
Mathiessen  v.  McMahon  ....  227 
Matteson  v.  Ellsworth  ....  214 
Matthews  v.  Allen  ....       169,  170 

Matthey  v.  Gaily 175 

Mattison  v.  Marks   .     .     .    .     ,     30, 37 

May  V.  Kelly 51 

V.  Quimby 244 

Mayes  v.  Robinson  ......    196 

Mayhew  v.  Boyd 266 

McDaniel  v.  w'hitsett    207, 209,  210,  211 

McDonald  v.  Bailey 168 

McDowell  V.  Keller 27 

McEvers  v.  Mason 66 

McFetrich  v.  Woodrow    ....      48 

McGee  v.  Prouty 270 

McGrath  v.  Clark 219 

McKinney  v.  Crawford  ....  157 
McKleroy  v.  Southern  Bank     .  98,  225 

McLemore  v.  Powell 265 

McRaven  v.  Crisler ....      208,  210 

McVeigh  v.  Allen 160 

Meade  v.  Sandidge  .  .  .  207,  221 
Mechanics'  Bank  v.  Merchants'  Bank  107 

V.  Stratton 25 

V.  Valley  Packing  Co.  .  .  .  98 
Mellish  V.  Rawdon  ....  114, 155 
Memphis  Bethel  v.  Bank  .  .  232,  258 
Mercer  County  v.  Hacket  ...  10 
Merchants'  Bank  v.  Cummings  186,  187 

V.  Eagle  Bank 52,  69 

V.  Gregg 94 

('.  State  Bank 68 


XXIV 


CASES   CITED. 


PAOB 

Merchants  of  the  Staple  v.  Bank 

of  England 15,21 

Meriden  Bank  v.  First  National  Bank  26 

V.  Gallaudet 181 

Merriam  v.  Cunningham  ....    226 

V.  Wolcott 182 

Merrill  v.  Hurley 93 

Merritt  t).  Duncan  .  .  .  197,233,235 
Messmore  v.  Morrison  .  .  .  35,  37 
Metropolitan  Bank  v.  Jones  ...       69 

Meyer  i'.  Hibsher Ill 

V.  Richards 181 

Michaud  v.  Lagarde 178 

Michigan  Bank  v.  Leavenworth  248,  249, 

264 
Middleton  v.  Griffith  .  .  13,  85,  198 
Middleton  Bank  v.  Morris  .  .  .  114 
Millard  v.  Barton     ......     252 

Miller  v.  Austin 22 

V.  Farmers'  Bank 162 

17.  Gilleland 208 

V.  Rej'Rolds 46 

V.  Thomson 75 

Mills  V.  Bank  of  United  States    134, 138 

Milton's  Case 8 

Minneapolis    Threshing    Machine 

Co.  V.  Davis 17 

Minot  V.  Russ 67,  69 

Miser  v.  Trovinger       .....     145 

Mitchell  V.  Hewitt 28 

Mogul  Steamship  Co.  v.  McGregor  7 
Mohawk  Bank  v.  Broderick      .    76,  79 

Moies  V.  Bird 191 

Montelius  v.  Charles    .     .     =     .     .    114 

Moore  v.  Baird .    257 

17.  Gushing  ......     92,  97 

V.  Hershey 227 

17.  Ryder 248 

Mordecai  v.  Dawkins 230 

Morehead  v.  Parkersburg  Bank  .  213 
Morgan  v.  Davison  ......     122 

Morley  v.  Culverwell 271 

Mornyer  v.  Cooper 256 

Morris  v.  Bethell 226 

Morrison  v.  McCartney  ....  77 
Morrison  Lumber  Co.  v.   Lookout 

Mountain  Hotel  Co 97 

Morse  v.  Huntington 262 

Morton  v.  Westcott 159 

Moses  V.  Lawrence  Bank      .    .   48,  191 

Mott  17.  Hicks 228 

Moulton  V.  Camroux 272 

Meyer's  Appeal 168 


PASS 

Muilman  v.  D'Eguino      ....    114 

Mumford  17.  Weaver 1 98 

Munn  V.  Baldwin 149 

17.  Burch 78 

Mussey  v.  Eagle  Bank     .    .    68,  69,  76 

Musson  V.  Lake 106,  130 

Myer  v.  Hart 30 

Myrick  v.  Hasey 193 

N. 

Nash  17.  Brown 109 

17.  De  Freville 18 

Nashville  Lumber  Co.  v.  Fourth 

National  Bank     ....      232,  255 
National  Bank  v.  Kirby  ....     240 

V.  Miller 69,  252 

V.  Slette 31 

National  Bank  of  North  America 

V.  Bangs 225 

National  Park  Bank  v.  Ninth  Na- 
tional Bank 225 

V.  Seaboard  Bank      .     .     .    .    298 

Nave  17.  Richardson 130 

Nazro  v.  Fuller 209 

Nebeker  i7.  Cutsinger 221 

Neff  V.  Horner 214 

Nelson  v.  Boynton 59 

V.  First  National  Bank  ...      53 

17.  Flagg 261 

Newcorab  i7.  Raynor    .    .     .      261,  262 

Newell  V.  Gregg 239 

17.  Holton 102 

New  England  Loan  Co.  17.  Robinson  198 
Newman  17.  King  .  .  207,  209,  210 
Newmarket  Bank  i7.  Hanson  .  .  198 
New  York  Co.  17,  Selma  Sav.  Bank  144 
Niagara  Bank  v.  Fairman  Manuf.  Co.  109 

Nicholls  V.  Webb 132 

Nichols  17.  Norris 268 

Nicholson  17.  Gouthit 126 

Nickerson  17.  Sheldon 30 

Northern  Bank  17.  Porter  ....  228 
Northwestern    Bank    i7.    Bank    of 

Commerce 98 

Nunez  v.  Dautel 35 

Nutter  17.  Stover 244,  249 


o. 


Gates  17.  First  National  Bank      247;  248 
Ocean  Bank  v.  Fant 108 


CASES  CITED. 


XXV 


FAOB 

Ocean  Bank  i>.  Williams .  .  125,131 
Ogden  U.  Co.  v.  Wright ...    44,  46 

Okie  V.  Spencer 2G4 

Olendorfer  v.  Meyer 247 

Ontario  Bank  v.  Lightbody  .     .     .     182 

V.  Petrie 141 

Oothout  I'.  Ballard 18 

Oppenheimer  v.  Bank  .  30,  239,  257 
Orear  i'.  First  National  Bank     .     .     284 

V.  McDonald 72,  74 

Oridge  v.  Sherborne  .  .  .  .  90,  117 
Oriental  Bankw.  Blake  120, 175, 176, 178 

Orr  V.  Maginnis 131 

Osborn  v.  Moncure 18,  42 

Osborne  v.  Gullikson 190 

Osgood  V.  Osgood 186 

V.  Pearsons 24 

Otis  V.  Ciillum 181 

Otsego  Bank  v.  Warren  .  .  130,  171 
Overend,  In  re 256 

V.  Oriental  Corp 262 

Owens  V.  Snell 252 


P. 

Pack  v,  Thomas 76 

Packard  v.  Richardson     ....    192 

Page  V.  Cook 37 

V.  Gilbert     .......     141 

V.  Wight 45 

Palmer  v.  Thaj'cr   ....  .     247 

Pannell  v.  McMechen  ....  262 
Park  Bank  v.  Watson  ....  258 
Partridge  v.  Davis  ....  93,  193 
Passumpsic  Bank  v.  Goss  .  197,  233 
Paton  V.  Coit     ....    231,  252,  253 

V.  Winter 214 

Patten  v.  Gleason   ......    253 

Patterson  v.  Todd 115 

Paul  V.  Joel 137 

Peabody  Co.  v.  Wilson  .  130,  132,  154 
Peacock  v.  Purcell  ....  245,  246 
Peale  v.  Addicks  .  .  186,  187,  253 
Pearson  v.  Bank  of  Metropolis      .    110 

Peaslee  v.  Bobbins 227 

Pelton  V.  San  Jacinto  Lumber  Co.  209 
People's  Bank  v.  Brooke       .     .     .    130 

V.  Clayton 245 

V.  Franklin  Bank  ....  220 
Peoria  Manuf.  Co.  v.  Huff  ...  186 
Percival  v.  Frampton  ....  245 
Perry  v.  Green 170 


PAoe 
Peruvian  Ry.  Co.,  In  re  .    .    .    .    228 

Peters  v.  Beverly 249 

V.  Hobbs 164 

Peterson  v.  Hubbard 55 

Pettee  v.  Prout 198,  199 

Phelan  v.  Moss 214 

Phelps  V.  Abbott 104 

Phillips  V.  Cox 47 

V,  Dippa 167 

Phoenix  Bank  v.  Hussey       ...       11 

Pierce  v.  Cate 112, 175 

V.  Kittredge 58 

V.  Struthers      ....       163,  164 

V.  Whitney 109 

Pigot's  Case       207,  208 

Pilmer  v.  State  Bank 199 

Pinnes  v.  Ely 93 

Poole  V.  Tolleson 157 

Pons  •!;.  Kelly V4 

Porter  v.  Keinball 169 

Pownal  V.  Ferrand 90 

Pratt  V.  Conan 248 

Prentice  i?.  Zane 257 

Prescott  Bank  v.  Butler  ...      98,  99 

Price  V.  Edmonds 268 

V.  Neal 224 

Prideaux  v.  Criddle     .     .     79,  124, 157 
Prince  v.  Oriental  Bank  ....    109 

Bring  v.  Clarkson 264 

Pryor  v.  Bowman 115 

Putnam  v.  Hubbell 247 

Putnam  Bank  v.  Snow    .   53,  58,  63,  65 


Q- 


Quinby  v.  Merritt 24,  27 


R. 


Railroad  Co.  v.  Ashland 

.     281 

Randall  v.  Moon      .     . 

275 

Ransom  v.  Mack 

141 

Ray  V.  Smith 

171 

Read  v.  Adams  . 

282 

Reddick  v.  Jones 

245 

Redlich  V.  Doll  . 

219 

Reed  v.  Roark    . 

21 

Reid  V.  Morrison 

,    174 

Requa  v.  Collins     . 

163 

Rey  V.  Simpson  . 

» 

.      47 

Rhett  V.  Poe  .    . 

U 

XXVI 


CASES   CITED. 


FAOE 

Rice  V.  Raitt 249 

Richie  v.  McCoy 74 

Riilington  i'.  Woods 218 

Rif^i^an  V.  Green 227 

Riiidge  I'.  Kimball 169 

Rindskopf  v.  Doman 170 

Roads  V.  Webb       29.  30 

Roberts  v.  Corbin 11 

V.  McGrath 14 

V.  Taft 158, 159 

V.  Wood 14 

Robinson  v.  Ames 72,  74 

V.  Hawkst'ord 77 

V.  Reed 214 

V.  Reynolds 257 

r.  Smith 198,  199 

Robinson  Seminary  v.  Campbell    .     196 

Robson  V.  Curlewis 1.37 

Rockwood  V.  Crawford     ....     157 

Rodney  v.  Wilson 104 

Rodocanachi  v.  Buttrick       .    47,  48,  49 

Rogers  v.  Bedell 6,  104 

r.  Blackwell 227 

Rosenplanter  v.  Toof 226 

Rosher  V.  Kieran 144 

Ross  V.  Espy 104 

I'.  Hurd 169 

Rothschild  v.  Currie 283 

Rounds  V.  Smith 69 

Rouquette  v.  Overmann     .     .     283,  284 

Routh  V.  Robertson 141 

Roxborough  v.  Messick    ....     244 
Rover  v.  Keystone  Bank       .     .     .     244 

Rucker  v.  Hiller 72,  74 

Rudd  V.  Matthews 226 

Russell  V.  La  Roque    ......     186 

V.  Whipple 22 

Rvan  V.  Chew 249 


Saco  Bank  v.  Sanborn      .    159,  160,  163 

Saint  V.  Wheeler  Co 189 

Sanford  v.  Nickles 88 

Schilmmelpennich  v.  Bayard  .  .  62 
Scholfield  V.  Londesborough216,  220,  223 
School  District  v.  Scheidley       .     .    242 

Scott  V.  Greer 169 

V.  Ocean  Bank 250 

Sea  V.  Glover 31 

Seacord  v.  Miller 171 

Sears  v.  Lantz     .......      93 


PASS 

Seaton  v.  Scovill 30 

Sebree  Bank  v.  Moreland      .     .     .     144 
Second  National  Bank  v.  Morgan  .    236 

Seibel  v.  Vaughan 221 

Seniple  v.  Turner 47 

Seneca  Bank  v,  Neass 132 

Sessions  v.  Johnson 42 

Seymour  v.  Brainerd 132 

V.  Cowing 16 

V.  Mickey 48 

V.  Wilson 249 

Shain  v.  Sullivan 83 

Shanklin  v.  Cooper 282 

Shannon  v.  McMullin  .     .     .       260,  261 
Shattuck  V.  Eldredge  .     .     .       252,  254 

Shaw  V.  Croft 144 

V.  First  Methodist  Soc.  .     .     .    221 

V.  Jacobs 83 

V.  Knox 92,  103 

Shaylor  v.  Mix 148 

Shed  V.  Brett 160 

Shelburne  Falls   Bank   v.  Towns- 
ley     150,  159 

Shelton  v.  Carpenter 149 

V.  Gill 30 

Shepard  Lumber  Co.  v.  Eldridge  .    204, 

218,  220,  223 
Sheridan  v.  Carpenter  ....  170 
Shipman  v.  Bank  of  New  York  .  26 
Shoe  &  Leather  Bank  v.  Dix  .  .  44 
Shoenberger  f.  Lancaster  Sav.  Inst.  146 

Short  V.  Trabue 282,  283 

Sidle  V.  Anderson 8 

Sigerson  v.  Mathews    .     .     .      167,  169 

Simpson  v.  Pacific  Ins.  Co.    .     .     78,  7y 

V.  Turney     ....  144,  151,  153 

Sipe  V.  Earman 247 

Sittig  V.  Birkestack 25t; 

Skilding  v.  Warren 102 

Skillings  v.  Marcus 261 

Slater  v.  Foster 85 

I'.  Moore 207 

Slawson  V.  Loring 45,  54 

Slocomb  V.  De  Li jardi .....    146 ' 

Small  V.  Smith 255 

Smalley  v.  W^ right 146 

Smead  i-.  Indianapolis  Ry.  Co.       .    228 
Smith  V.  Allen    .......      21 

V.  Aylesworth 18 

I'.  Bank  of  Washington       .     18,  42 

V.  Gibbs 125 

V.  Kendall 31 

V.  Mace 213 


CASES   CITED. 


XXVll 


PAOB 

Smith  V.  Marsack 98 

V.  Miller  ....     77,  79,  172,  178 

V.  Munsetter 16,  17 

V.  Poillon 151 

V.  Shippey 31 

V.  Smith 250 

V.  Weston  ....  227,  238,  271 
Sohier  v.  Loring  ....  262,  263 
Solarte  v.  Palmer  ....  136,  137 
Southwark  Bank  v.  Gross  .  .  .  209 
Spaulding  v.  Andrews      ....       53 

Spear  v.  Pratt 55 

Spence  v.  Crockett 131 

Spencer  v.  Bank  of  Salina    .     .     .     164 

Sperry  v.  Horr 20,  30,  31 

Spies  V.  Gilmore      ....      174,  193 

Sprague  r.  Tyson 164 

Sprekels  v.  Bender      .    .     .      198,  199 

Stafford  v.  Rice 102 

Stalker  v.  McDonald 244 

Stall  V.  Catskill  Bank  ....  238 
Staniback  v.  Bank  of  Virginia  .  .  130 
Staples  V.  Franklin  Bank      .     .     18,  43 

State  V.  Cobb 240 

V.  Hurd 110 

State  Bank  r.  Fearing      .     .     .98,  101 

V.  Slaughter 145 

V.  Smith 186 

V.  Thompson 230 

Steele  v.  McKinley 47 

Steiner  v.  Jeffries 52 

Stevens  v.  Beals 86 

V.  Blanchard 245 

Stewart  v.  Lansing 252 

Stoddard  v.  Penniman      ....     209 

Stoneman  v.  Pyle 30 

Story  V.  Lamb 94 

Stotts  17.  Byers 250 

Stough  V.  Ponca  Mill  Co.      ...    237 

Strong  V.  Wilson 102 

Stuart  17.  Lancaster 248 

Stults  V.  Silva 30,  37 

Stump  V.  Napier 102 

Sturgis  V.  Metropolitan  Bank    .     .    235 

StuTterant  v.  Forde 253 

Sussex  Bank  v.  Baldwin  ....  110 
Sutcliffe  V.  Humphreys    ....       18 

Sutton  17.  Grey 59 

Swan  V.  Crafts 247 

V.  North  British  Co.  .     15,  218,  220 

Swartz  r.  Redfield 115 

Swetland  v.  Creigh 28 

Swift  V-  Tyson 245 


Swope  17.  Ross    .    . 
Sylvester  v.  Downer 


PAOB 

.    271 

47,48 


T 

Tappan  t7.  Ely 91 

Tardy  17.  Boyd 164,  166 

Tarleton  v.  Shingler 214 

Tarver  v.  Nance 72 

Tassel  v.  Lewis 133 

Taylor  t7.  Beck 102 

V.  Blakelock 245 

17.  Curry 34 

V.  Davis 46 

17.  Dobbin 40 

17.  Harmison 242 

17.  Jacoby 18 

17.  Snyder     ....   112,  164,  174 

Temple  v.  Seaver 88 

Tenney  17.  Prince 48,  191 

Thayer  v.  Bnffum 87 

17.  Grossman 102 

17.  King 172 

Third  Nat.  Bank  v.  Ashworth     169,  170 

17.  Marine  Lumber  Co.    .     .     .  237 

Thomas  v.  Exchange  Bank  ...  50 

Thompson  17.  Briggs    .....  250 

17.  Camming 80 

V.  McCullough 182 

V.  Sloan 28 

Thornton  i7.  Maynard 276 

Thorp  V.  Craig 282 

Tiernan  i7.  Woodruff 266 

Tile  Co.  17.  Bank 52 

Timberlake  17.  Thayer      ....  177 

Timmins  i7.  Gibbins 183 

Tindal  v.  Brown 143 

Tobey  v.  Barber 249 

Todd  17.  Bank  of  Kentucky  .     .     .  210 
Topeka  Company  i7.  Merriam   .     .231 

Towne  V.  Rice 230 

Townsend  17.  Bush ]02 

17.  Lorain  Bank     .     .    141,  168,  169 

Townsends  i7.  Bank  of  Racine  .     .  182 

Townsley  v.  Sumrall 53 

Trabue  i7.  Short 283 

Treon  v.  Brown 102 

Triggs  17.  Newnham 122 

Trimby  17.  Vignier 280 

Troy  Bank  v.  Lauman     .     .     .  109,  210 

True  17.  Bullard 104 

V.  Thomas 76 


XXVlll 


CASES  CITED. 


PAOK 

Trust  Co.  r.  Smythe 196 

Tucker  Manuf.  Co.  v.  Fairbanks  .     44, 

45,  46 
Tuckerman  v.  Harwell    .     .       207,  221 

Tunstall  v.  Walker 162 

Turner  v.  Killian 245 

Tuttle  V.  Bartholomew     .     .     .93,  194 

V.  Standish 172 

Tyler  v.  Young 115 

Tyson  v.  Oliver 164 


u. 

Union  Bank  v.  Hyde    80,  125,  132,  168, 

177 

V.  Roberts 209 

V.  Stoker 160 

V.  Willis      ....     47,  127,  128 
United  States  v.  American  Bank       298 

V.  Hodge 265 

United  States  Bank  v.  Geer   6,  104,  240 

Upham  V.  Prince 194 

Utica  Brewing  Co.,  In  re     •    .    .    272 


V. 

Valette  v.  Mason 245 

Valk  V.  Simmons 74 

Vance  v.  Louther 209 

Van  Etta  v.  Evenson 256 

Van  Hoesen  v.  Van  Alstyne      .     .  157 
Veazie  Bank  v.  Wynn     ...     18,  43 

Voorhies  v.  Attee 175 


w. 

Wade  V.  Withington   .....  207 

Walker  v.  Bank  of  New  York  .     .  109 

V.  Ebert 14 

V.  Rogers 73 

V.  Stetson    .     .     .80,  161,  162, 164 

Wallace  v.  Jewell 210 

V.  McConnell 35 

Walmsley  v.  Acton 130 

Walrad  v.  Petrie 24 

Walton  V.  Mandeville      ....  58 

V.  Shelley 101 

Wamesit  Bank  v.  Buttrick    .     .     .  149 

Ward  V.  Allen 216 

Ware  v.  Street 182 


tAQK 

Waring  v.  Betts  ....  106,  173 
Washington  Bank  v.  Krura  .  .  250 
Washington  Ins.  Co.  v.  Miller  .  38 
Waterbury  v.  Sinclair      ....    193 

Watkins  v.  Crouch 170 

Watts  V.  Cans 79 

V.  Pub.  Admr 41 

Way  V.  Butterworth 48 

,      V.  Dunham 263 

V.  Lamb 256 

V.  Smith 30, 37 

Wayne  Bank  v.  Low 283 

Weaver  v.  Barden 249 

Webster  v.  Howe 52 

Welch  V.  Taylor  Manuf.  Co.       172, 178 

Weldon  v.  Buck SO 

West  V.  Brown 107,  111 

Westfall  V.  Braley  ......     182 

Westgate  v.  Healy 24 

Wetherall  v.  Clagett 132 

Wheeler  v.  Field     .    .     .    112,  164, 173 

V.  Guild 273,  274 

Wheelock  v.  Freeman      ....    214 

Whistler  v.  Forster 85 

White  V.  Gushing 32 

V.  North 22 

V.  Richmond 27,  28 

V.  Smith 38 

V.  Snell 38 

Whitehead  v.  Walker  ....  256 
Whitesides  v.  Northern  Bank     209,  210 

Whitmer  v.  Fry 214 

Whitmore  v.  Nickerson    ....     256 

Wieland  v.  Kobick 226 

Wiesinger  v.  First  National  Bank        18 

Wilkins  r.  Jartis 122 

Wilkinson  v-  Johnson       .     .      210,  211 
Willard  v.  Nelson    ......    205 

Willet  V.  Parker      ....       197,  233 

Willets  V.  Phoenix  Bank  ...  25 
Williams  v.  Bank  of  United  States    163 

I'.  Brashear 74 

V.  Holt 198 

V.  Smith 258 

V.  Wade 283 

V.  Walbridge 102 

Willis  V.  French 98 

V.  Green 127,  145 

Willoughby  v.  Willoughby  .  .  24 
Wilson  V.  Campbell     .     .     .19,  31,  196 

v.Eifler 248 

V.  Lazier 252 

V.  Williman 18 


CASES  CITED. 


XXIX 


PAGE 

Wilson  V.  Wilson 16 

Windham  Bank  v.  Norton    .      119,  166 

Wing  V.  Ford 252 

Winslow  V.  Everett  Bank  ...  223 
Wireback  v.  First  National  Bank     227, 

272 
Witherow  v.  Slayback  .  .  102, 171 
Witherspoon  v.  Musselman  ...      30 

Witte  V.  Williams 271 

Wolf  V.  Burgess 162 

Wolfe  V.  Jewett 174 

Wood  V.  Draper 217 

V.  Price 72 

V.  Steele 209,  217 

Woodhall  V.  Streeter 261 

Woodhiill  V.  Holmes 102 

Woodland  v.  Fear 109 

Woodruff  V.  Hill     .     .     .   258,  279,  280 

V.  Plant 79 

Woods  V.  North 30 

Woods  Co.  r.  Schaeffer    ...     16,  40 

Woodsun  V.  Wood 88 

Woodward  v.  Foster 104 

Woodworth  v.  Bank  of  America    .    207 

V.  Huntoou 257 


PAOE 

Woolfolk  V.  Bank  of  America  .    .  213 
Worcester  Bank  v.  Wells     .     .     65,  66 

Worden  v.  Dodge 32 

Works  V.  Hershey 37 

Worrall  v.  Gheen 218 

Worster  v.  Forbush 227 

Wright  V.  Hart 27 

V.  Morse 4S 

V.  Shawcross    ......  156 

Wynn  v.  Alden 141 


Y. 

Yocum  V.  Smith 258 

Young  V.  Grote 219,  220 

V.  Stevens 227 

Young  Men's  Gymnasium  Co.  v. 

Eockford  Bank 256 

Youngs  V.  Lee 24!) 


z. 

Zimmerman  v.  Rote 


221 


i 


BILLS,  NOTES,  AND  CHEQUES. 


CHAPTER  I. 

LAW  MERCHANT. 

§  1.     Law  Merchant  and  the  Common  Law:  General 

Theory. 

Law  merchant,    lex  mercatoria,   is  a  term   in  use  wherever 
the  English  language   prevails,   to  designate  certain  branches 
of  law  imported  at  different  times  into  England,   j^^^  merchant 
and   matriculated    there,    from   the   Continent    of  an  importa- 
xLurope,  where  they  formed   part   of   the   modern  term  in  this 
Roman  or  Civil   law.     We  are  concerned  in  this    ®*^  ' 
book  with  a  branch  which  deals  with  the  law  of  bills,  notes, 
and  cheques.     This  branch  of  the  law  merchant  has  retained 
throughout  its  life,  to  the  present  day,  its  essential  characteris- 
tics, clearly  marking  it  off  from  the  common  law,  while  other 
branches  have  differed  so  little  from  the  common  law  or  have 
become  so  far  assimilated  to  it  that  the  fact  is  all  but  forgotten 
that  they  are  not  of  the  common  law  stock.     The  result  is  that 
the  term  law  merchant  at  the  present  time  usually  suggests  the 
law  of  bills,  notes,  and  cheques.     That  will  be  sufficient  justifi- 
cation for  the  use  of  the  term  in  this  book. 

The  common  law,  on  the  other  hand,  was  a  native  of  Eng- 
land,  already   venerable    when    the    law  merchant 
crossed  the  English  Channel.     Before  that  time  the  a  native  of 
common  law  had  defined  and  settled  the  conception  ^"S'*^'^- 
of  contract  for  England. 

The    law  merchant  was  no  part  of   the  law  of  England  for 
generations  after  it  had  followed  trade,  in  a  private  capacity,  to 

1 


2  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  L 

the  British  Islands.     Unlike  admiralty  and  equity,  it  was  for 

centuries  a  sort  of  tolerated  outlaw,  living  only  as  the  merchants 

,  ,  could  keep  it  alive  in  those  self-eoverniue  and  self- 

Law  merchant  -"^       _  _  '^  '^^ 

a  tolerated  out-  supporting  tribunals  of  theirs  called  the  pie-powder 
or  dusty-foot  courts,^  and  carrying  out  its  judg- 
ments only  by  pressure  upon  those  who  came  within  its  extra- 
legal jurisdiction.  But  it  lived  in  England  as  elsewhere  upon 
the  vital  principle  of  determined  usage  in  business,  and  hence 
was  not  foredoomed  to  die. 

The  time  caine  when  it  must  take  its  place,   even  if  piece- 
meal, by  the  side   of   the   common   law,  and  of  admiralty  and 
.  equity,   in    the    jurisprudence  of  England.      With 

English  juris-  sound  credentials  in  hand,  it  knocked  for  adpais- 
pru  ence.  gjon;    but    it    knocked   at    the    gates,    not    of     its 

ancient  kinsmen  equity  or  admiralty,  but  of  the  common  law 
which  claimed  the  land.  It  is  a  curious  question  what  uiighb 
have  happened  had  the  gates  not  opened.  Admiralty  had  al- 
ready been  exercising  jurisdiction  over  instruments  in  the 
nature  of  bills  of  exchange  and  promissory  notes  pertaining  to 
contracts  in  the  commerce  of  the  high  seas;  ^  and  there  was  not 

^  See  Scrutton,  Mercantile  Law,  chapters  1,  2. 

^  In  the  first  third  of  the  16th  century  Admiralty  was  taking  juri.sdictioa 
as  of  course  of  the  enforcement  of  such  instruments  as  the  following :  — 

Exhibited  in  the  High  Court  of  Admiralty  of  England  on  the  S"*  ot 
March,  1533. 

Be  it  known  to  all  men  that  I  Thomas  Thorne  haberdasher  of  London 
have  taken  up  by  exchange  of  Thomas  Fuller  merchaunt  of  the  staple 
of  Callys  the  sum  of  Ix  pounds  sterling  the  which  sum  of  thre  skore  pound.t 
sterling  to  be  payd  to  the  said  Thomas  Fuller  or  to  tM  hrynqer  of  this  byll 
in  manner  and  forme  foloynge  that  is  to  wyte  the  xxiiij  daye  of  August  next 
after  the  date  of  this  byll  to  pay  xxx  pounds  sterling  and  the  xx  day  of 
September  next  foloyng  to  pay  other  xxx  pounds  sterlinij;  to  the  which  pay- 
ments well  and  truly  to  be  payd  to  the  sayd  Thomas  Fuller  or  to  the  hninger 
hereof  at  the  days  before  wrytten  I  the  said  Thomas  Thorne  bynd  me  myne 
ayres  executors  and  assignes  and  all  my  goods  In  wytnes  whereof  I  the 
sayd  Thomas  Thorne  have  wrytten  this  byll  wythe  myne  ownehand  subscrybyd 
my  name  and  sett  to  my  seale  the  xviij  daye  of  Aprill  anno  mv<'xxviij''> 

per  me  Thomas  Thorn 

Fuller  V.  Thorne,  Select  Pleas  in  the  Court  of  Admiralty,  Selden  Society, 
p.  41.     As  to  the  proceedings  and  judgment  in  the  case  see  id.  p.  179.     There 


Sect.  1.]  LAW  MERCHANT.  3 

■wanting  intimation  that  the  Chancellor  of  England  might  be 
ready  to  receive  the  new  applicant.^  Had  the  Admiralty  se- 
cured its  hold,  or  Chancery  acquired  general  jurisdiction  over 
our  subject,  or  had  the  custom  been  adopted  as  it  was,  with  its 
own  courts  and  powers,  it  is  certain  that  the  law  of  bills  und 
notes  would  not  have  been  what  it  is.  The  doctrine  of  con- 
sideration, of  joint  contracts,  and  other  things  foreign  to  law 
merchant,  would  hardly  have  appeared. 

But  the  custom  applied  for  admission  at  the  hands  of  common 
lawyers,  to  common  law  judges,  at  the  common  law  courts;  and 
the  applicant  could  not  hope  for  success  except  by  , 

putting  on  the  common  law  garb.  Fictions  were  the  common 
accordingly  resorted  to  in  the  pleadings,  by  which 
it  was  made  to  seem  that  the  custom  was  after  all  nothing  but 
a  sister  of  the  common  law.  Suit  was  brought  in  assumpsit, 
upon  a  foreign  bill  of  exchange,  alleging  in  effect,  by  a  fiction 
of  factorage  or  agency,  that  the  defendant,  acceptor  of  the  bill, 
had,  at  the  hands  of  his  foreign  factor,  received  money  from  the 
]»laintiff,  in  consideration  whereof  he  now,  in  accepting  the  bill 
drawn  by  his  factor  for  the  purpose,  promised  to  repay  the 
same.^  Here  were  both  consideration  and  privity  of  contract, 
of  the  common  law.  The  courts  winked  at  the  allegations, 
accepted  the  fictions  as  not  to  be  traversed,^  and  called  for  proof 
only  of  what  was  left. 

Thus  foreign  bills  of  exchange,  received  into  the  law  on  their 
own  feigned  likeness  to  simple  contract,  were  brought  within 

are  other  interesting  cases  of  the  kind  in  the  same  volume.  Gale  v.  Browne, 
id.  p.  55,  a  '  byll '  in  sets,  in  which  Browne  acknowledges  'that  I  owe  unto 
you  Thomas  Gale  haberdasher  of  London  x  pounds  x  sh.  The  which  .  .  . 
I  promise  ...  to  pay  unto  the  sayd  Thomas  Galle  or  to  his  assigns  within 
XX  dais  after  the  save  aryving  of  the  said  good  shipe  into  the  ryver  of  Temys,' 
etc.  A.  D.  1536.  Hurste  v.  Barnyes,  id.  p.  72,  'bill  obligatory,'  prom- 
ising to  pay  to  Barnyes  '  or  John  Flowde  or  any  of  your  [Barnyes']  assygnes.' 
A.  D.  1538. 

1  See  Dunlop  v.  Silver,  1  Cranch,  367;  Cases,  1,  at  p.  3. 

■-*  Rastell's  Entries,  10  (1st  ed.  anno  1564)  ;  Dunlop  v.  Silver,  1  Cranch, 
367;  Cases,  1,  3,  5. 

*  Cases,  6. 


4  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  L 

the  jurisdiction  of  judges  at  that  time  educated,  not  in  the  law- 
merchant,  but  in  the  common  law  only,  with  all  which  that  fact 

^  ,  ,  ,  implies  ;  and  in  the  hands  of  the  common  law 
In  hands  of  ^  -iTii-n 

common  law       judges  they  have  always  remained.     Inland  bills 

■"^  ^**'  followed  and  took  their  place  in  the  same  manner. 

Promissory  notes  met  energetic  opposition  from  the  common 
law  judges,  especially  from  Lord  Holt,^  but  were  at  last  ad- 
mitted, on  the  footing  of  inland  bills,  by  an  Act  of  Parliament 
in  the  reign  of  Queen  Anne.^  Cheques  followed  in  due  course.* 
And  all,  like  foreign  bills,  fell  into  the  hands  of  the  common 
law  judges,  and  have  there  remained. 

Why  the  law  merchant,  or  rather  the  custom  of  merchants, 
applied  for  admission  into  the  English  law  is  plain.  It  was  not 
The  custom  because  it  was  defective  in  principles  and  needed  to 
needed'a'  "^  ^^  supplemented  by  another  system  of  law  ;  it  was 
sheriff.  g,  complete  and  adequate  body  of  custom,  which  by 

long  use  had  proved  itself  equal  to  its  purpose,  so  far  as  its  con- 
tents were  concerned.  What  the  custom  of  merchants  wanted, 
what  it  asked  for  in  seeking  admission  to  the  law,  was  a  sheriff ; 
and  that  only.  Its  customers  were  becoming  refractory  ;  press- 
ure was  not  enough  to  compel  them ;  the  arm  of  the  law  was 
needed  to  enforce  its  judgments. 

This  then  is  the  cardinal  fact,  that  the  custom  did  not  need 
or  want  the  common  law.  '  But  the  custom  fell  into  the  hands 
How  common  of  the  common  law  judges,  and  the  natural  result 
treated  kw  followed  —  the  judges  took  every  opportunity  to 
merchant.  assimilate  the  subject  to  the  common  law;  with  the 

result,  not  always  to  the  advantage  of  the  law  merchant,  that  the 
newer  law  bears  many  marks  of  the  common  law.  The  fact  has 
not  been  steadily  kept  in  view,  that  the  law  merchant  is  only  a 
legalized  body  of  custom,  fully  developed,  and  to  be  adminis- 
tered in  sound  theory  accordingly.  In  sound  theory  the  appeal, 
in  a  disputed  case,  should  be  to  the  custom,  or  the  law  as  the 

^  Gierke  v.  Martin,  Ames,  Cases  on  Bills  and  Notes,  ii.  525  ;  Dunlop  v. 
Silver,  Cases,  at  pp.  9,  10. 

2  3  &  4  Anne,  c.  9,  anno  1704. 

'  Grant  v.  Vaughan,  3  Burr.  1516,  anno  1764. 


Sect.  1.]  LAW  MERCHANT.  5 

embodiment  of  the  custom  ;  in  default  of  custom  or  law,  the 
dispute  should  be  decided  upon  legal,  not  necessarily  common 
law,  reasoning  consistent  with  law  merchant. 

As  a  matter  of  fact  the  appeal,  in  cases  in  which  neither  cus- 
tom nor  law  is  plain,  has  generally  been  to  the  common  law. 
The  result  has  been  proper  enough  in  most  cases,  as  for  instance 
in  the  very  common  and  important  matter  of  interpretation. 
But  it  has  not  always  been  so  in  other  matters ;  perhaps  not 
always  in  interpretation. 

In  some  cases  the  original  custom,  after  generations  of  time, 
has  been  forgotten  if  it  was  ever  known  by  the  common  lawyers, 
and  some  doctrine  of  the  common  law,  plainly  con-  Custom  some- 
trary  to  it,  has  been  fastened  upon  the  law  merchant.  tenTjoinP 
The  doctrine  of  joint  contract,  with  its  refinements,  contract, 
is  an  instance,  and  an  instance  which  has  worked  serious  harm 
to  the  law  merchant.  By  the  custom,  as  by  the  modern  law 
merchant  on  the  Continent,  joint  parties  to  contract,  such  as 
partners,  were  not  merely  liable  individually  after  judgment 
against  them  jointly,  but  (as  should  be  true  because  they  were 
ultimately  liable  individually  on  the  judgment)  they  were 
suable  individually.  But  this  rule  of  the  custom  was  set  aside, 
probably  in  ignorance  that  it  had  ever  existed,  for  the  narrow 
technical  rule  of  the  common  law,  adopted  on  reasoning  peculiar 
to  that  law,  whereby  the  joint  parties  were  treated  as  an  indivis- 
ible body.  By  the  first-named  rule  each  party  could  be  sued 
separately,  until  satisfaction  ;  by  the  second  one  suit  only  (with 
certain  exceptions)  was  possible,  thougli  it  was  not  brought 
against  all.^ 

Another  instance  of  the  kind  may  be  seen  where  in  some 
States  an  actual  piece  of  existing  custom  has  been  overturned 
by  applying  (doubtful)  common  law  doctrine  to  the 

case.     The  instance  referred  to  is  the  application  rule  applied  to 

t  .-I  nj  1         -J  i£x-L  law  merchant. 

01  the  so-called  parol  evidence  rule  oi  the  common 

law  (which  excludes  contemporaneous  parol  evidence  to  vary  the 

terms  of  a  written  contract)  to  blank  indorsement  of  a  negotia- 

1  See  Bigelow,  Estoppel,  104-111,  5th  ed. 


6  BILLS,  NOTES,  AND   CHEQUES.  [Chap,  t 

ble  instrument.  It  is  said,  where  the  notion  prevails,  that  the 
indorsement,  being  blank,  is  not  a  written  contract,  and  hence 
that  the  rule  does  not  apply ;  it  may  be  shown  accordingly  that 
the  understanding  of  the  parties  to  the  indorsement  was  that 
it  was  not  to  create  liability.^  This  quite  overlooks  the  fact 
that  the  law  merchant  has  its  own  waj'  of  exempting  indorsers 
(and  others)  from  liability,  and  that  is,  by  writing  appropriate 
words  of  exemption,  such  as  '  Without  recourse,'  in  connection 
with  the  signature.  This,  it  is  believed,  is  the  only  way  known 
to  the  law  merchant  of  exempting  a  party  to  the  instrument 
from  liability. 

Other  instances  of  the  kind  might  be  given;  but  these  will 
suffice.  The  mischief  of  them  lies  in  the  mistaken  notion  ini- 
Mischief  of  re-  P^i^d,    that   the    law   merchant    is   a    sort   of    poor 

sorting  to  com-  relation  of  the  common  law,  or  rather  that  it  is  a 
mon    law:    law 

merchant  not  a  dependent  of  the  common  law,  subject  to  it  wher- 
dependent.  •,  ■,  •  j.       i    •  o      t.     • 

^  ever   its   own    language    is    not   plain.     iSuch    in- 

stances, in  other  words,  overlook  the  fact  that  the  law  merchant 
is  an  independent,  parallel  system  of  law,  like  equity  or  admi- 
ralty. The  law  merchant  is  not  even  a  modification  of  the 
common  law ;  it  occupies  a  field  over  which  the  common  law 
does  not  and  never  did  extend. 

But  the  notion  of  the  generality  of  the  common  law  is 
abroad;  so  much  so  that  it  has  been  asserted  that  there  is 
Law  merchant  nothing  peculiar  even  in  that  most  essential  doc- 
by  estoppel.  trine  of  the  law  merchant  by  which  equities  are 
cut  off.'  This,  it  is  said,  is  no  more  than  estoppel  by  the 
*  general '  law.  The  suggestion  would  hardly  have  met  with 
favor  in  the  time  of  Lord  Holt  ;  he  and  those  before  him  looked 
upon  the  custom  as  something  extremely  hostile  to  the  common 
law  of  England.  If  in  reply  it  be  said  that  the  estoppel  referred 
to  is  of  comparatively  recent  origin,  as  it  is,  the  result  will  only 

1  Espy  V.  Ross,  66  Penn.  St.  481  ;  Harrison  v.  McKim,  18  Iowa,  485; 
Rogers  v.  Bedell,  97  Teun.  240  ;  United  States  Bank  r.  Geer,  55  Neb.  462. 

*  See  an  article  in  the  Law  Quarterly  Review,  for  April,  1900,  on  Negotia- 
bility and  Estoppel,  by  John  S.  Ewart,  Q.  C.     Further  see  infra. 


Sbct.  1.]  LAW  MERCHANT.  7 

be  this,  that  the  common  law  has  been  expanding  and  taking  on 
ideas  which  might  perhaps  have  been  sufficient  for  law  mer- 
chant had  they  existed  early  enough.  But  that  does  not  lead 
to  the  conclusion  that  the  common  law  is  to  be  considered  as 
the  source  to  be  drawn  upon  in  settling  questions  of  the  law 
merchant.  It  does  not  show  that  the  law  merchant  is  not  a  dis- 
tinct branch  of  law,  sufficient  unto  itself.  The  custom  of  mer- 
chants is  still  the  custom  of  merchants,  though  men  may,  by 
estoppel  in  other  things,  bring  about  like  results.  'Nullum 
simile  est  idem.' 

The  point  to  be  insisted  upon  is  the  right  of  the  custom  to 
govern  itself,  and  to  be  treated  as  governing  itself,  however 
closely  something  else  may  resemble  it.     It  is  the  j^j  1,^  „{  ^jjg 

right  of  business  to  make  its  own  laws,  and  to  be  custom  to  gov- 
,,,,.,  ,.  /-ii  11         em  itself, 

looked  to  directly  as  doing  so.     Custom  made  law 

merchant,  and  it  is  to  little  purpose  to  say  that  the  common 

law  has  found  out  another  way  to  like  results ;  or  rather  it  is 

misleading  to  say  so,  for  it  is  putting  one  on  the  wrong  scent. 

*  Law  '  then  'should  follow  business' ;  ^  it  should  not  divert 
or  anticipate  the  course  of  business,  except  for  most  urgent  rea- 
sons. Certain  portions  of  the  Negotiable  Instru-  Law  should  fol- 
ments  Law  may  accordingly  be  criticised.  The  Jhe  ^cenT***" 
Statute  does  not  always  follow  business.  Thus  the  Statute, 
Statute  has  an  article  on  acceptance,  and  another  on  payment, 
of  bills  of  exchange  for  honor  ;  ^  but  there  is  nothing  like  a  cus- 
tom in  this  country,  such  as  prevails  in  England,  to  accept  or 
pay  bills  for  honor.  What  custom  may  do  or  seek  to  do  may 
not  be  foreseen ;  the  Statute  may  embarrass  the  course  of  busi- 
ness here.  Freedom  of  contract  is  the  clear  note  of  sound  polit- 
ical economy,  and  should  therefore  have  its  course. 

^  In  these  words  the  author  quotes  a  serious  remark  made  to  him  by  the 
late  Lord  Bowen,  in  a  conversation  concerning  the  decision  of  the  Court  of 
Appeal  in  the  great  case  of  the  Mogul  Steamship  Co.  v.  McGregor,  23  Q.  B.  D. 
612  (affirmed,  1892,  A.  C.  25),  in  which  his  lordship  (then  Lord  Justice 
Bowen)  had  just  delivered  his  well-known  opinion.  The  words  quoted,  it  is 
confidently  believed,  contain  the  very  substance  of  sound  legal  theory. 

■''  Articles  xiv.,  xv. 


8  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  L 


§  2.     Consideration:  Grace:  Negotiability. 

Law  merchant,  in  regard  to  bills,  notes,  and  cheques,  is  a 
particular  law  of  consideration,   grace,   and  negotiability. 

A  special  doctrine  of  consideration,  differing  in  manifestation 
from  that  of  the  common  law,  arose  in  the  very  outset,  by  rea- 
Peculiar  doc-  ^^^  ^^  ^^^^  fiction  before  referred  to.  Consideration 
trine  of  con-  ^as  stated  in  the  fiction,  and  (the  allegation  not 
sideration :  .  iiNiii<  i-ii  •  ,. 

production  of      being  traversable)  therefore  did  not  require  proof. 

instrument.  j^  j^^^^.  ^jj^pg  ^}^g  fiction  was  dropped,  and  the 
allegation  simpl}'^  ran,  that  the  defendant  became  liable  by  the 
custom  of  merchants.  That  allegation  in  turn  was  dropped,  and 
a  short  statement  of  consideration  finally  took  its  place,  where 
it  has  remained.^ 

The  net  result  has  been  that  the  production  of  the  instrument 
raises,  against  any  party  to  it,  whether  maker,  drawer,  acceptor, 
or  indorser,  at  least  where  the  instrument  is  negotiable,^  a  pre- 
sumption that  his  undertaking  is  supported  by  a  valuable  coh- 
Bideration.^  In  other  words,  the  general  presumption  of  liaMlity 
which  prevailed  under  the  custom  before  its  matriculation  into 
law,  has  been  converted  into  the  narrower  presumption  of  con- 
sideration of  the  present  day. 

How  this  differs  from  the  rule  of  the  common  law  in  regard 
to  simple  contract  in  writing  is  plain.  By  the  common  law  the 
plaintiff  in  such  a  case  is  bound  to  give  some  actual  evidence  of 
consideration;  production  of  the  writing  is  not  enough,  unless 

^  On  the  history  of  this  branch  of  the  subject  see  Dunlop  v.  Silver,  Cases, 
6-11,  and  the  cases  and  notes  in  Professor  Ames's  Cases  on  Bills  and  Notes, 
ii.  520-538.  On  the  difficulties  of  suing  in  debt  see  Milton's  Case,  Ames,  ii. 
520;  Bishop  v.  Young,  id.  532. 

2  As  to  non-negotiable  instruments  there  is  a  conflict  of  authority.  See 
Bigelow's  L.  C.  Bills  and  Notes,  23 ;  and  among  other  cases  Carnwright 
V.  Gray,  127  N.  Y.  92,  in  favor  of  the  presumption,  and  Sidle  v.  Anderson, 
45  Penn.  St.  464,  contra.   The  Statute  relates  only  to  negotiable  instruments. 

*  N.  I.  L.  §  31.  The  plaiutitf  does  not  lose  the  benefit  of  the  presumption 
by  offering  evidence  to  show  consideration.  Durland  v.  Durland,  153  N.  Y.  67. 
Partial  failure  of  consideration  between  immediate  and  like  parties  may  be 
shown,  at  least  by  statute.  Burgess  v.  Nash,  66  Vt.  44;  Hoyt  v.  McNally, 
id.  48. 


Sbct.  2.]  LAW  MERCHANT.  9 

its  language  itself  shows  what  is  required.  But  as  regards  the 
very  nature  of  consideration  there  is  no  difference  between  the 
law  merchant  and  the  common  law;  the  common  law  doctrine 
has  been  fully  fixed  upon  the  law  merchant  in  this  respect.^ 

Grace  is  a  short  period  of  time  extended  by  the  unwritten  law 
to  the  parties  to  instruments  not  payable  on  demand,  in  ease  of 
providing  payment.  It  arose  before  the  age  of  steam,  ^j^^j  grace 
when  communication  was  slow  and  often  difficult,   's  and  how  it 

T     •  •  1         1  c  •      1    1  arose :  abol- 

It  IS  said  to  have  been  a  mere  matter  of  indulgence  ished  by  the 
at  first,  at  the  holder's  election ;  however  that  ma_v      ^  ^  ^' 
be,  custom  finally  established  it  as  matter  of  right  in  favor  of 
the  defendant.^    The  rule  is  peculiar  to  the  law  merchant;  and 
the  reason  for  it  having  mostly  ceased,  it  has  been  abolished 
by  the  Statute.'^  '  ~* 

Negotiability  in  the  law  merchant  is  the  property  whereby 
the  bill,  note,  or  cheque  passes,  or  may  pass,  from  hand  to  hand 
like  money,  so  as  to  give  a  holder  in  due  course  the  -^j^^^  negotia- 
right  to  hold  the  instrument  and  collect  the  sum  bility  in  law 

.  c  f  1   J-  mi  merchant  is  : 

payable,  for  himself,  free  from  defences.  The  com-  common  law  • 
mon  law  originally  knew  nothing  of  the  kind,  ^*  ''^^^  * 
except  in  regard  to  money  and  the  English  (not  American) 
doctrine  of  'market  overt.'  Much  progress  has  been  made  in 
the  common  law,  in  one  way  or  another,  towards  negotiability, 
not  merely  in  the  sense  of  the  transferribility  of  choses  in  ac- 
tion, but  of  the  right,  by  way  of  estoppel,  of  the  transferrer  to 
collect  the  same  for  himself  free  from  defences ;  but  it  is  mis- 
leading to  say  that  negotiability  in  the  law  merchant  is  there- 
fore only  a  matter  of  estoppel  by  the  '  general '  law  of  our  day.^ 
Negotiability  in  the  law  merchant  arose  in  and  rests  upon  cus- 
tom alone.  Estoppel  is  only  a  very  late  analogy ;  no  authority 
on  the  law  of  bills,  notes,  or  cheques  has  ever  questioned  the 
basis  of  the  law  or  intimated  that  it  was  a  matter  of  estoppel, 

1  There  is  possibly  a  difference  between  the  two,  due  to  the  persistent  and 
just  pressure  of  custom  touching  bills  and  notes,  in  cases  of  transfers  by 
debtors  to  their  creditors  of  securities  for  a  pre-existing  debt. 

•■!  N.  I.  L.  §  92. 

8  See  Mr.  Ewart's  clever  article,  already  referred  to. 


10  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  L 

however  true  it  is  that  estoppel  has  heen  referred  to  as  con- 
ferring a  kind  of  negotiability  upon  certain  instruments  of  the 
common  law.^ 

To  be  negotiable  the  instrument  must  be  payable  to  bearer  or 
to  order,  in  terms  or  in  plain  meaning;  and  by  the  unwritten 

,     law  merchant    it  should  not  be  under  seal.     The 

Form  of  words    ^ — - — -■■  ~  -■ — ;■ — *      -'  ■  .  ,  

for  negotia-       latter  rule  IS  changed  by  the  Statute  ;  wnich  pro* 

iiy.  sea.       yides  that  the  negotiable  character  of  the  instru- 

ment  shall  not  be  affected  by  affixing  a  seal  to  it.*     And  it  had 

before  been  held  that  the  negotiability  of  paper  of  a  corporation 

was  not  taken  away  by  putting  it  under  seal.* 

*  See  the  cases  quoted  in  Mr.  Ewart's  article.  Of  course  Mr.  Ewart  does 
not  denj'  that  negotiability  in  the  law  merchant  is  due  to  custom,  but  hia 
article  argues  that  the  law  merchant,  as  regards  its  chief  feature  negotiability, 
is  now  lost  in  the  general  i.  e.  common  law  doctrine  of  estoppel. 

2  N.  L  L.  §  13,  4. 

8  Chase  Bank  v.  Faurot,  149  N.  Y.  532  ;  Marine  Manuf.  Co.  v.  Bradley, 
105  U.  S.  175  ;  Mercer  County  v.  Hacket,  1  "Wall.  83.  The  coupons  of  a 
corporation  are  promissory  notes.  Boyer  v.  Chandler,  160  111.  394.  Cer- 
tificates of  deposit  payable  to  order  are  negotiable,  by  custom.  Kirkwood  v. 
First  National  Bank,  40  Neb.  484.  So  of  course  of  the  certification  of 
cheques. 


S*)CT.  l.J  GENERAL  DOCTRINE.  11 


CHAPTER  II. 
GENERAL  DOCTRINE. 

§  1.     Definitions. 

A  PROMISSORY  note  is  a  writteii  promise,  and  a  bill  of  ex- 
change a  written  order  upon  a  person,  to  pay  to  a  certain 
person  or  order,  or  to  the  order  of  a  certain  per-  rpj^^  different 
son,^  or  to  bearer,'^  a  certain  sum  of  money,  abso-  instruments  of 
lutely.'  A  cheque  is  a  written  order  upon  a  bank 
or  banker  to  pay  on  demand  *  (otherwise  as  in  the  case  of  a 
note  or  bill).^  'Draft'  is  a  term  of  convenience,  signifying 
either  a  bill  of  exchange  or  a  cheque,  but  more  commonly  the 
former.  Bills  of  exchange  and  cheques  are  foreign  or  inland; 
those  drawn  in  one  state  or  country  and  payable  in  another  are 
foreign;®  all  others  are  inland.  Paper  is  negotiable  only 
when  made  payable,  in  terms  or  plain  intent,  to  '  order,'  or 
to  'bearer.' 

Bills  of  exchange,  especially  foreign  bills,  are  often  drawn, 
for  safety  of  transmission,  in  a  numbered  set  of  two  or  more, 
each  containing  a  provision  in  effect  that  it  is  payable  only  iu 
case  the  others  are  unpaid.  Where  a  bill  is  so  drawn  the  whole 
of  the  parts  therefore  will  constitute  but  one  bill.' 

^  N.  I.  L.  §  15.  2  la.  §  16. 

«  Id.  §§  133,  191.  *  See  Id.  §  14. 

^  Id.  §  192.  The  promise  or  the  order  is  '  written  '  if  there  is  a  written 
signature  to  it. 

•"  N.  I.  L.  §  136.  Bank  of  United  States  v.  Daniel,  12  Peters,  32.  But 
see  Giinishaw  i;.  Bender,  6  Mass.  156 ;  Phoenix  Bank  v.  Hussey,  12  Pick.  483  ; 
Buckner  v.  Finley,  2  Peters,  586  ;  making  the  residence  of  the  drawer  and 
drawee  the  test.  That  cheques^may  be  cheques  though  drawn  in  one  country 
and  payable  in  another,  see  Hey  wood  v.  Pickering,  L.  R.  9  Q.  B.  428; 
Roberts  v.  (Jor6in7~26  Iowa,  315. 

'  N.  I.  L.  §  185. 


12  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IL 

The  following  are  examples  of  the  three  kinds  of  instru- 
ment:— 

1.  Boston,  Jan.  1,  1892.  Six  months  after  date  I  promise  to 
pay  to  A  (or  to  A  or  order,  or  to  the  order  of  A,  or  to  bearer) 
One  Thousand  Dollars.     Value  received.     B, 

2.  (Date.)^  Thirty  days  after  sight  (or  after  date,  or  at 
sight)  pay  (as  above).  Or,  pay  this  first  of  exchange,  second 
and  third  unpaid.  To  C  (individual,  partnership,  bank  or 
other  corporation). 

3.  (Date.)  Pay  (as  above,  '  Value  received  '  being  usually 
omitted).     To  the  Eagle  Bank,   Boston. 

The  law  however  prescribes  no  particular  form  of  words  for 
any  of  these  instruments;  it  is  satisfied  if  the  essentials  of  the 
instrument  are  stated,  however  inartificially.* 

§  2.     Parties. 

The  person  who  executes   a   promissory  note   is  called   the 

maker,  not   the  drawer;  the  person  who  executes  a  bill  of  ex- 

^,         ,         change  is  called  the  drawer,  not  the  maker;  the  per- 

drawer  to  be  son  who  executes  a  cheque  is  generally  called  the 
distinffuished.       .  ,  •  ^i  i  t,-,  .  i  i 

drawer,  sometimes  the  maker,     ine  names,  thi-ough 

carelessness  or  indifference,  are  now  and  then  confused;  but 
the  contract  of  the  maker  of  a  note  differs  radically  from  that 
of  the  drawer  of  a  bill,  and  it  is  best  therefore  to  give  to  each  its 
recognized  name.  The  contract  of  one  who  executes  a  cheque  is 
anomalous;  it  is  not  that  of  drawer  of  a  bill  or  maker  of  a 
note;  but  on  the  whole  the  better  usage  gives  to  the  person 
the  name  of  drawer. 

The  person  to  whom,  bj'-  name,  a  note,  a  bill,  or  a  cheque  is 
made  payable  is  called  the  payee;  the  person  upon  whom  a  bill 
or  a  cheqiie   is  drawn,    that  is,   the   person    called 
drawee:  upon  to  make  payment,  is  called  the  drawee,  and 

indorser.  -^^  ^^^^  q£  acceptance  by  him  (the  instrument  being 

a  bill  of  exchange),  acceptor.  When  the  payee,  or  other  person 
at  the  same  time  or  afterwards,  puts  his  name  upon  the  paper, 

1  SeeN.  L  L.  §1.%  1  ;  §§  19,  20. 

a  See  N.  I.  L.  §  24  ;  also  id.  §§  12,  13. 


Sect.  3.]  GENERAL  DOCTRINE.  13 

the  act  is  called  indorsement,  and  the  party  an  indorser.  The 
person  to  whom  the  paper  is  then  or  afterwards  passed  is  called 
indorsee  or  holder.  The  term  holder  is  sometimes  applied  to  the 
payee;  the  term  indorsee  is  applied  to  a  holder  after  an  indorse- 
ment, even  though  the  indorsement  be  not  immediately  to  him. 
Parties  absolutely  liable  are  called  primary  parties,  and  are 
said  to  be  primarily  liable.  Other  parties  are  called  secondary 
parties,  and  are  said  to  be  secondarily  liable.^ 

§  3.     Delivery. 

The  contract  of  the  defendant  is  not  complete,  and  no  action 
upon  the  instrument  can  oe  maintained  against  him,  even  by  a 
holder  in  due  course,  until   he   has  delivered  the  i^j,trymejjt 
instrument.''      And    delivery    imports    more    than  must  be 
handing  over  to  another;  lit  imports  such  a  trans- 
fer of  the  instrument  to  aaother  as  to  enable  the  latter  to  hold! 
it  for  himself.     If  the  defendant  has  only  put  the  paper  into, 
the  hands  of  his  agent,  oi:  of  a  custodian,  to  hold  accordingly, 
he  has  not  delivered  it  any  more  than  if  he  had  passed  it  from 
his  right  hand  to  his  left;   he  has  only  enabled  the  agent  or, 
custodian  to  deliver   it.      Theft  from  the   agent  or   custodian, 

would  be  nothing  more  jthan  theft  from  the  defendant. 

i 

Delivery  may  be  by  initention,  by  agency,  or  by  negligence, 
and,  it  seems,  in  no  other  way.     But  the  defendant  may  estop 
himself  to  deny  delivery.^     Delivery  by  intention  Modes  of 
is    often    called    actual    delivery;    while    delivery  delivery, 
without   intention   is   often   called    constructive   delivery.     But 
*  constructive  '  delivery  is  delivery  as  fully  as  is  '  actual ' ;  the  7^ 
terms  are  somewhat  misleading  and  of  no  special  use. 

Delivery  of  the  instrument  by  intention,  that  is,  transferring 
it  to  another  with  intent  that  he  shall  hold  it  for  himself,  in- 
cludes mistake.     A  toing  done  in  mistake  is  done  intentionally, 

1  N.  I.  L.  §  3.         / 

2  Burson  v.  Huntington,  21  Mich.  415  ;  Cases,  227 ;  Middleton  v.  Griffith, 
57  N.  J.  442.  See  Baxendale  v.  Bennett,  3  Q.  B.  Div.  525,  But  see  N.  I,  L. 
§  23,  which  is  not/fclear. 

«  See  post,,p^.  202-205. 


14  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IL 

though  the  effect  or  result  may  not  be  in  the  mind  and  hence 

may  not  be  intended.     I  may  desire  to  send  a  letter  to  A,  but 

„  ,.        ,  if  in  consciousness  I  send  it  to  B,  though  under 

Deliverv  bv  .        .  •         i  t     t_ 

intention:"  mistake,  the  sending  is  intentional.  1  have 
mista  e.  adopted  the  means  whereby  the  letter  goes  to  B, 

and  that  is  enough. 

Delivery  of  the  instrument  by  agency  may  not  be  delivery  by 

intention  of  i\iQ principal  at  all;  it  may  be  delivery  contrary  to 

his  intention,  and  even  against  his  orders.     And 
Delivery  bv  .       ,       i  i  i  ■  ^ 

agency:  '  agency  in  the  law  merchant  has  a  wider  meaning 
custodians.         ^j^^^  ^^^  ^^^^  j^^^  -^^  ^j^^  common  law.     This  fact 

seems  to  have  been  overlooked  in  some  cases.  Thus  it  has 
sometimes  been  supposed  that  where  the  instrument  has  been 
put  into  the  hands  of  a  mere  custodian,  one,  that  is  to  say, 
having  nothing  to  do  but  to  keep  it,  the  rule  of  agency  does  not 
apply  if  in  violation  of  his  trust  the  custodian  transfers  it.  The 
custodian  is  not  an  agent  according  to  the  common  law,  and  not 
being  held  out  as  an  agent,  he  cannot  bind  the  defendant,  it  is 
said,  by  transferring  the  instrument.^ 

It  is  true  that  a  mere  custodian  is  not  even  a  special  agent, 
in  the  law  of  agency  in  general;  but  it  does  not  follow  that  he 
may  not  be  treated  as  an  agent  in  the  law  merchant.  The  law 
merchant  may  well  have  a  doctrine  of  agency  of  its  oyji>.  Mer- 
cantile interests  require  special  protection  in  the  purchase  of 
negotiable  instruments,  and,  by  custom,  it  may  well  be  enough 
to  confer  title,  that  the  defendant  has  enabled  the  custodian  to 
pass  the  instrument  to  a  bona  fide  holder  for  value.'^ 

Delivery  by  negligence  imports  that  the  instrument  has 
passed   into   circulation,    without  intention   or  agency,   by  the 

1  Chipman  v.  Tucker,  38  Wis.  43  :  Roberts  v.  McGrath,  id.  52  ;  Roberts 
r.  Wood,  id.  60.     See  Carter  v.  Moulton,  51  Kans.  9. 

2  The  Wisconsin  cases  above  cited  are  not  supported  by  the  authorities  to 
which  they  refer.  Burson  v.  Huntington,  21  Mich.  415  ;  Cases,  227  ;  Baxen- 
dale  V.  Bennett,  3  Q.  B.  Div.  525.  These  were  cases  in  which  the  paper  waa 
stolen.  The  cases  of  Walker  v.  Ebert,  29  Wis.  194,  and  Kellogg  v.  Steiner, 
id.  626,  were  also  distinguishable  ;  they  were  cases  of  fraud  in  the  very  being 
of  the  contract,  so  that  no  contract  was  ever  executed.  Foster  v.  Mackinnon. " 
L.  R.  4  C.  P.  704  ;  Cases,  237. 


Sect.  3.]  GENERAL  DOCTRINE.  16 

defendant's  failure  to  exercise  reasonable  care  in  keeping  it  in 
his  hands,  as  for  instance  in  a  den  of  thieves  or  gamblers  or 
in  a  brothel.  But  it  would  not  be  enough  that  Delivery  by 
the  instrument  passed  into  circulation  by  reason  "*^  'gence. 
of  some  remote  negligence  of  the  defendant.  The  defendant's 
negligence,  to  make  it  a  case  of  delivery,  should  have  been  in 
the  very  matter  of  the  instrument's  passing  into  circulation.^ 
Hence  where  the  instrument  passed  out  of  the  defendant's  pos- 
session into  the  hands  of  another,  after  the  defendant  had  kept 
it  in  a  negligent  way  for  awhile,  but  not  by  reason  thereof, 
there  has  been  no  delivery  by  the  defendant's  negligence.  Cus- 
tom has  not  established  any  rule  upon  the  subject,  and  the  rule 
of  law  must  therefore  rest  upon  legal  reasoning.^ 

Delivery  by  intention  is  of  course  valid  in  all  cases  ;  delivery 

by   agency  within  the  scope  of  the  agent's  authority  is  valid, 

even  though  in  violation  of  the  defendant's  instruc-  r^.   . 

"^     _  Distinctions 

tions,  if  the  instrument  was  transferred  to  a  holder  touching  kinds 
in   good  faith   without  notice;  delivery  by  negli- 
gence is  probably  valid  only  in  favor  of  a  holder  in  due  course/ 

The  defendant  may  then  show,  against  any  holder,   that  he 

never  delivered  the  instrument  in  any  way;  unless  indeed  he 

has   estopped   himself  from   doing  so.'*     Assuming  „  ., 

A 1  ®         _  ^    Evidence  as  to 

however  that  there  has  been  a  delivery  hy  the  delivery:  condi- 
defendant,  it  should  be  noticed  that  delivery  ordi- 
narily is  not  the  subject  of  any  stipulation  or  term  of  the 
instrument,  and  hence,  though  proved,  is  still  a  subject  fur 
evidence,  between  the  parties  to  the  act  and  those  similarly 
situated,  in  regard  to  its  real  import.  Between  the  parties  and 
against  holders  with  notice  or  without  consideration,  delivery 
may  then  be  shown  to  have  been  upon  some  condition  or  stipu- 

1  See  Merchants  of  Staple  v.  Bank  of  England,  21  Q.  B.  Div.  160  ;  Swan 
V.  North  British  Co.,  2  Hurl.  &  N.  175,  182  ;  Arnold  v.  Cheque  Bank,  1  C. 
P.  D.  578 ;  Bank  of  Ireland  v.  Evans  Charities,  5  H.  L.  Cas.  389  ;  Bank  of 
England  V.  Vagliano,  1891,  A.  C.  107,  115,  135,  136,  170,  171;  Baxendale 
r.  Bennett,  3  Q.  B.  Div.  525  ;  Bigelow,  Estoppel,  655-659,  5th  ed. 

2  Negligence  in  delivery  should  not  be  confused  with  want  of  care  by 
which  a  forgery  has  been  made  easy.     See  as  to  the  latter  post,  pp.  217-220. 

3  Further,  see  post,  pp.  202-205. 

*  On  that  point  see  post,  pp.  202-205. 


16  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IL 

lation  which  has  not  been  met  or  has  been  violated.^  Thus  it 
might  be  shown  that  the  instrument  was  delivered  merely  in 
escrow,  for  some  special  purjjose  which  has  not  been  accom- 
plished, or  which,  when  accomplished,  required  a  return  of  the 
instrument  to  the  defendant.^ 

Some  courts  have  gone  still  further,  and  permitted  evidence, 

between  immediate   and  like  parties,  annulling  altogether  the 

effect  of  a  real  delivery,  even  against  the  maker  of 

Invalidating  .  . 

contract  by  a  promissory  note,  upon  the  specious  suggestion 
3rtio*nLT'"^  that  it  may  be  shown  that  the  delivery  was  condi- 

delivery,  un-  tional.  Thus  it  has  been  held,  upon  such  a  sugges- 
sound.  .  ,        .  ,        ,  ,         ,      1  T 

tion,   that  it  may   be  shown  that  the  delivery  was 

upon  the  •condition '  that  the  defendant  should  be  under  no 
liability  upon  his  signature.^  But  that  certainly  is  perverting 
the  rule  that  the  delivery  may  be  shown  to  be  conditional. 
Conditional  delivery  necessarily  imports  possible  liability,  lia- 
bility upon  the  happening  or  performance  of  the  condition;  it 
is  a  contradiction  to  say  that  a  condition  of  itself  can  destroy 
liability.  The  terms  of  the  contract  creating  liability,  whether 
written  or  imported  by  the  law  merchant,  are  not,  in  .sound 
reason,  to  be  circumvented  and  wholly  annulled,  as  they  would 
be  by  declaring  that  the  delivery  was  conditional. 

To  say  then  that  a  signature  is  to  be  without  recourse  against 
the  signer  is  not  to  say  that  the  delivery  is  to  be  conditional ; 
Signature  with-  exemption  from  recourse  is  exemption  from  liabil- 
out  recourse.  j^y.  The  idea  of  exemption  relates  only  to  liability, 
and  is  perfectly  consistent  with  delivery;  the  common  case  of 
indorsement  in  terms  '  without  recourse '  plainly  shows  the 
fact.  Indorsement  '  without  recourse '  is  no  evidence  of  want 
of  delivery  or  of  any  condition  pertaining  to  the  act  of  deliver3\* 

1  N.  L  L.  §  23  ;  Higgins  v.  Ridgway,  153  N,  Y.  130  ;  Benton  v.  Martin, 
52  N.  Y.  570  ;  Seymour  v.  Cowing,  4  Abb.  Ct.  App.  Dec.  200  ;  Labbee  v. 
Johnson,  66  Vt.  234  ;  Smith  v.  Munsetter,  58  Minn.  159.  But  see  Henshaw 
V.  Dutton,  59  Mo.  139  ;  Hubble  v.  Murphy,  1  Duval,  278. 

2  Smith  V.  Munsetter,  supra.  Not,  it  must  be  noticed,  against  a  holder  in 
due  course.     Lookout  Bank  v.  AuU,  93  Tenn.  645. 

'  Higgins  V.  Ridgway,  and  other  New  York  cases,  supra. 
*  The  misleading  New  York  doctrine  is  opposed,  in  principle  at  least,  to 
Be€ch«r  v.  Dunlap,  52  Ohio  St.  54  ;  Wilson  v.  Wilson,  26  Oreg.  251  ;  Woods 


Sect.  5]  GENERAL  DOCTRINE.  17 


§  4.     Essentials  of  Contract  :  Defences. 

The  law  merchant  adopts  the  doctrines  of  the  common  law  in 
regard  to  the  essentials  of  contract;  whatever  the  form  of  the 
contract  in  question,  —  whether  that  of  maker,  ac-  r 

^  '  '  Law  merchant 

ceptor,   drawer,    or  indorser,    or   other  party,  —  it  adopts  common 

must  be  supported  b}'  valuable  consideration,  there 
must  be  agreement,  and  the  parties  liable  must  be  competent  to 
contract.  And  that  is  true,  not  only  between  immediate  parties, 
but  between  mediate  or  remote  parties  as  well.  Thus,  there 
must  be  a  valuable  consideration,  not  merely  to  support  an  ac- 
tion by  the  payee  of  a  promissory  note  against  the  maker,  — 
there  must  somewhere  be  a  valuable  consideration  to  support  an 
action  against  the  maker  by  the  payee's  indorsee.  So  if  there 
be  a  want  of  agreement  between  the  maker  and  the  payee,  there 
will  be  a  want  of  agreement,  upon  the  same  facts,  between  the 
maker  and  the  payee's  indorsee  ;  and  so  if  the  maker  is  incom- 
petent to  contract  with  the  payee,  he  is  incompetent  to  contract 
with  the  payee's  indorsee. 

So  also  of  defences  ;  all  defences  of  the  common  law  are  de- 
fences, so  far  as  they  are  available  under  the  doctrine  of  negoti- 
ability, in  the  law  merchant.  The  question  in  other  words  is 
not  whether  a  defence  good  by  the  common  law  is  good  by  the 
law  merchant,  but  whether  the  defence  can  be  alleged  against 
the  particular  plaintiff,  who  may  be  an  indorsee  or  the  like. 

§  5.     Maturity-  of  the  Contract. 

The  contract  reaches  what  is  called  its  maturity  as  soon  as  it 
is  due,  that  is,  at  the  earliest  time  when  demand  of  payment  is 
authorized  ;  its  maturity  is  past,  and  the  contract  is  overdue, 

V.  Schaeffer,  173  Mass.  443  ;  Hall  v.  First  National  Bank,  id.  16;  Heist  r. 
Hart,  73  Penn.  St.  286,  289  ;  Henshaw  v.  Dutton,  59  Mo.  139  ;  Hubble  i'. 
Murphy,  1  Duval,  278  ;  Minneapolis  Threshing  Machine  Co.  v.  Davis,  40 
Minn.  110,  115;  Smith  v.  Munsetter,  58  Minn.  159.  The  oral  condition  in 
some  of  these  cases  related  indeed  to  the  contract,  but  there  is  no  sound  dis- 
tinction between  such  cases  and  treating  an  understanding  of  exemption  from 
liability  as  a  condition  in  the  delivery  of  the  instrument.  See  Minneapolis 
Threshing  Machine  Co.  v.  Davis,  supra. 

2 


18  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IL 

on  the  following  day,  whether  the  following  day  be  a  secular  or 
a  non-secular  day.  If  then  the  instrument  is  entitled  to  grace, 
What '  matu-  it  will  reach  its  maturity  in  the  morning  of  the 
wheno^Qtract  ^^^^  ^^7  ^^  grace,  at  a  reasonable  hour,  and  not 
overdue.  before  that  day ;   if  it  is   not  entitled  to  grace,  it 

will  reach  its  maturity  as  if  it  were  a  common  law  contract, 
except  as  the  subject  may  be  regulated  by  statute.^  An  instru- 
ment payable  on  demand,  in  terms,  in  legal  effect,  or  by  statute, 
is  due,  or  at  maturity,  from  the  moment  of  delivery,  that  is, 
without  grace,  and  is  overdue  after  known  demand,'  or  after 
the  lapse  of  a  reasonable  time,'  or  as  statute  may  declare. 

IMvcffcrmBfT 

As  the  undertaking  is  not  overdue  until  the  day  of  maturity 
has  passed,  no  action  on  the  instrument  can  in  principle  be 
When  suitcan  maintained  before  that  time.  Some  confusion  ex- 
be  brought.  jg^-g^  however,  in  the  authorities  upon  this  point, 
arising  probably  from  the  fact  that  there  may  be  a  dishonor  of 
the  instrument  on  the  day  of  its  maturity,  —  a  dishonor  for  the 
purpose  of  giving  valid  notice  thereof  on  that  day.  But  there 
may  well  be  a  dishonor  for  the  purpose  of  notice,  upon  a  demand 
and  refusal,  on  the  day  of  maturity,  though  there  may  be  no  dis- 
honor on  that  day  for  the  purpose  of  suit.*  The  better  rule 
therefore  is,  that  the  parties  to  the  instrument  are  entitled  to 
the  whole  of  the  day  of  maturity,  and  are  exempt  from  suit  ac- 
cordingly.® And  this  too  whether  the  parties  are  primarily  or 
secondarily  liable. 

1  See  N.  L  L.  §§  78.  82,  92,  93. 

2  Nash  V.  De  Freville,  1900,  2  Q.  B.  72,  87.  «  N.  L  L.  §  78. 
*  Kennedy  v.  Thomas,  1894,  2  Q.  B.  759,  C.  A. 

^  Kennedy  v.  Thomas,  supra;  Wiesinger  v.  First  National  Bank,  106  Mich. 
291 ;  Sutcliffe  v.  Huiiiphreya,  58  N.  J.  42  ;  Osborn  v.  Moncure,  3  Wend.  170  ; 
Smith  V.  Aylesworth,  40  Barb.  104  ;  Ootliout  v.  Ballard,  41  Barb.  33  ;  Bevaii 
V.  Eldridge,  2  Miles  (Peiin.)  353  ;  Taylor  v.  Jacoby,  2  Barr,  497;  Smith  v. 
Bank  of  Washington,  5  Serg.  &  R.  318  (suit  against  indorser).  Contra, 
Staples  V.  Franklin  Bank,  1  Met.  43  ;  Estes  v.  Tower,  102  Mass.  65 ;  Veazie 
Bank  v.  Wynn,  40  Maine,  62  ;  Greeley  v.  Thurston,  4  Greenl.  479  ;  Flint  v. 
Rogers,  3  Shep.  67  ;  Wilson  v.  Willinian,  1  Nott  k  McC.  440  ;  Dennie  v. 
Walker,  7  N.  H,  201 ;  Coleman  v.  Ewing,  4  Humph.  241. 

According  to  Sutcliffe  v.  Humphreys,  supra,  suit  upon  an  instrument  pay* 


Sect.  5.]  GENERAL  DOCTRINE.  19 

The  question  of  the  time  when  suit  can  be  brought  has  usually 
arisen  in  the  case  of  instruments  entitled  to  grace  ;  but  grace 
cannot  create  any  peculiarity  in  the  matter.  The  day  of  the 
maturity  will  (or  will  not)  be  too  soon  for  suit  whether  the  in- 
strument is  entitled  to  grace  or  not.  The  question  of  the  time 
for  making  presentment,  for  the  purpose  of  fixing  the  liability 
of  secondar}'^  parties,  will  be  considered  in  a  later  chapter.  1 

able  at  hank  cannot  be  brought  even  after  banking  hours  of  the  day  of  matu- 
rity.    The  maker  in  all  cases  has  the  whole  of  the  day. 

The  day  of  maturity  may  be  hastened  by  agreement  in  the  instrument  that 
default  in  paying  interest  or  instalments  of  the  principal  shall  make  the  whole 
sum  payable  thereupon.  Fant  v.  Wickes,  10  Texas  Civ.  App.  394  ;  Wilson  v. 
Campbell,  110  Mich.  580;  Carlon  v.  Kenealy,  12  M.  &  W.  139 ;  post,  p.  31. 


20  BILLS.  NOTES,  AND  CHEQUES.  [Chap.  Ill 


PKysfcAL  ReQujsiTes 

CHAPTER  III. 
REQUISITES  :  ANALYSIS  OF  DEFINITION. 

[The  student  should  refer  to  the  dejinitions  given  ante,  p.  ll."] 

§  1.    Written  Promise  :  Written  Order. 

Promissory  notes,  bills  of  exchange,  and  cheques  must  be 
in  writing ;  no  oral  promise  or  order  would  be  treated  on  the 
Writing  re-  same  footing,  though  the  oral  undertaking  might 
whokinsSf-  ^^  *  perfectly  good  contract,  a  contract  of  the 
ment.  common  law.     The  requirement  of  a  writing  is  a 

requirement  of  the  law  merchant  as  derived  from  the  custom  of 
merchants.^  The  whole  instrument  must  be  in  writing,  and  all 
the  terms  necessary  to  constitute  it  a  bill,  note,  or  cheque  must 
be  found  within  the  four  corners  of  the  piece  of  paper  upon 
which  it  is  written.^  So  far  as  the  primary  contract  is  con- 
cerned, or  so  far  as  the  original  instrument  is  an  order,  it  must 
on  its  face  so  plainly  declare  itself  as  to  leave  no  place  for  ex- 
ternal evidence  further  than  to  identify  the  parties  designated 
by  it.  A  promise  to  pay  the  amount  of  one's  debt  would  be  an 
example;  however  certain  the  sum  due,  the  instrument  would 
not  be  a  promissory  note  because  of  the  necessity  of  resorting 
to  external  evidence  to  prove  the  amount  payable.  The  require- 
ment of  the  law  merchant  in  this  particular  (as  in  many  others) 
is  unique ;  but  the  reason  is  obvious  —  the  instrument  is  cur- 
rency, and  could  not  run  on  crutches.^ 

The  law  merchant  has  never  prescribed  any  particular  writing 
material,  or  any  particular  material  for  receiving  the  writing. 

*  The  Statute  only  affirms  the  previous  law.     N.  L  L.  §  8,  1. 
2  Compare  Sperry  r.  Horr,  32  Iowa,  184;  Cases,  15,  16. 

*  The  reason  in  strictness  applies  to  negotiable  instruments  only  ;  but  the 
rule  itself  probably  extends  to  non-negotiable  bills,  notes,  and  cheques  as  well. 


Sect.  1.]  REQUISITES.  21 

The  instrument  may  be  written  with  pencil  as  well  as  with- 
ink,^  and,  it  seems,  upon  any  material  firm  enough  of  itself  to- 
hold  the  writing. 

A  promissory  note  in  common  form,  as  shown  in  the  ex- 
ample,'' contains  a  promise,  expressed  by  that  word.  That 
however  is  unnecessary,*  but  what  will  satisfy  the  Express  prom- 
rule,  which  requires  a  promise,  is  not  clearly  de-  '**  "^  *  °°^®- 
termined.  It  is  generally  laid  down  that  the  promise  must  be 
express ;  hence  that  the  mere  fact  that  a  debt  is  acknowledged 
is  not  enough,  for  that  at  best  would  but  raise  an  implied 
promise.  For  example  :  '  Due  C  &  B  117.14  '  is  not,  it  seems, 
a  promissory  note,  for  want  of  an  express  promise  to  pay.*  The 
reason  for  the  rule  is  plain  ;  were  it  not  for  the  requirement 
of  an  actual  promise,  every  debt  and  every  sum  due  for  tort 
might  be  turned  into  a  promissory  note  by  acknowledging  it  in 
writing. 

But  to  say  that  a  promise  must  be  express  is  not  to  say  that 
the  word  'promise'  must  be  used;  a  promise  is  express  when 
either  the  word  '  promise,'  or  any  equivalent  word  or  expression, 
is  used. 

What   is   the  equivalent  of    'promise'?      The  question    has 
proved  troublesome.     It  is  a  question  of  interpretation  of  what 
amounts   to  a  declaration  of   the  maker's  will  to  Equivalent  of 
pay ;  but    interpretation  has  sometimes  gone  well  P'^o^i'se. 
afield  in  the  matter.     Setting  any  certain  time  for  payment  in 
express  terms  appears  to  be  accepted  as  an  equivalent ;  and  this 
even  though  the  words  of  time  are  'on  demand.'     For  example tii^ 
'  Due  J  A  194.91  on  demand  '  is  a  promissory  note  ;  it  being  7«Jt.-<w-^ 
deemed  an  express  promise  to  pay.^     The  use  of  words  of  ne-  /lAa  ^.  ^^ 
gotiability    is    also   treated   as   an    equivalent.     For   example: 
*  Due  R,  or  bearer,  $200.26.'     This  on  like  ground  is  a  promis- 

1  See  Geary  i;.  Physic,  5  Barn.  &  C.  234;  Brown  v.  Butcher's  Bank, 
6  Hill,  443;  Reed  u.  Roark,  14  Texas,  329. 

2  Ante,  p.  12. 

'  N.  I.  L.  §  8,  2,  does  not  require  the  use  of  the  word  '  promise,'  though 
it  declares  that  the  instrument  must  contain  a  '  promise.' 

*  See  Currier  v.  Lockwood,  40  Conn.  349. 

•  Smith  V.  Allen,  5  Day,  337;  Kimball  v.  Huntington,  10  Wend.  675. 


22  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  Ill 

sory  note.^  The  use  of  the  words  '  for  value  received  '  is  held 
insufficient.  For  example :  '  Due  C  &  B  117.14,  value  received,' 
is  not  a  promissory  note;  the  words  'value  received'  neither 
import,  nor  are  an  equivalent  of,  '  promise.'  *  And  so  it  has 
been  held  of  the  words  *  to  be  accountable '  in  an  instrument 
such  as  this :  *  I  have  received  the  sum  of  £20  which  I  bor- 
rowed of  you,  and  I  have  to  be  accountable  for  the  said  sum 
with  interest.'  ^ 

When  an  equivalent  of  '  promise  '  is  used,  it  matters  not  how 
the  acknowledgment  of  debt  is  made.  The  foregoing  would 
be  examples  of  what  are  commonly  called  '  due  bills  '  (with  an 
actual  promise).  Another  way  in  which  the  acknowledgment 
is  sometimes  made,  oftener  in  England  than  in  this  country, 
but  sometimes  here,  is  by  what  is  called,  from  the  letters  used, 
an  'I  0  U.'  For  example:  'I  0  U  £20  to  be  paid  on  the 
22d  inst.'  is  a  promissory  note.'*  Again:  'S  has  deposited 
in  the  State  Bank  11000,  payable  to  himself  on  return  of 
this  certificate,'  is  a  good  promissory  note,  though  a  certifi- 
cate of  deposit.® 

It  is  no  more  necessary  in  the  case  of  a  bill  of  exchange 
that  the  word  '  order '  be  used  than  that  the  word  '  promise ' 
AVord' order'  ^^  ^^®^  ^^  ^  promissory  note.  Any  equivalent 
in  a  bill.  word    or   expression   will    satisfy   the   definition; 

but  it  seems  here  that  the  law  does  not  give  such  loose  rein 
to  interpretation  as  we  have  just  seen  in  regard  to  the  word 
'promise.'  That  is,  the  equivalent  word  or  expression  is  to  be 
a  real  equivalent,  in  the  common  acceptation.  Still  it  is  not 
necessary  that  the  words,  literally  taken,  should  be  imperative; 
the  language  may  be  that  of  courtesy  and  politeness  in  form, 
as  often  it   is,   and  yet  be  imperative  in  the  eye  of  the  law. 

1  Russell  V.  Whipple,  2  Cowen,  536. 

^  Currier  v.  Lockwood,  40  Conn.  349;  two  judges  dissenting. 

3  Home  V.  Redfearn,  4  Bing.  N.  C.  433.  See  White  v.  North,  3  Ex.  689, 
690.  '  To  be  accountable  '  was  deemed  to  mean  that  credit  would  be  given  in 
account  and  the  balance  paid.     But  see  Miller  v.  Austin,  13  How.  218. 

*  Brooks  V.  Elkins,  2  Mees.  &  W.  74. 

•  Klauber  v,  Biggerstaff,  47  Wis.  551;  Beardsley  v.  Webber,  104  Mich.  88. 


Sbct.  3.]  REQUISITES.  23 

Euough  that  the  language  used  is  an  expression  of  the  drawer's 
will  that  the  money  shall  be  paid.  For  example:  'Please  let 
the  bearer  have  $50.  I  will  arrange  it  with  you  this  noon  '  is 
a  good  bill  of  exchange,  as  containing  an  'order'  to  pay.^ 
Again:  '  Mr.  B  will  oblige  Mr.  A  by  paying  C  or  order  $100  ' 
would  be  a  good  bill  on  the  same  footing.  A  little  less  how- 
ever might  be  fatal.  For  example :  '  Please  let  bearer  have 
£7,  and  place  it  to  my  account,  and  you  will  much  oblige 
me '  is  deemed  not  a  bill  of  exchange  for  want  of  an  '  order ' 
or  the  equivalent.^  Again:  '  We  hereby  authorize  you  to  pay 
on  our  account  to  the  order  of  G,  £6000 '  at  certain  times, 
in  stated  instalments,  is  not  a  bill  of  exchange,  for  the  same 
reason.' 

§  2.    Necessary  Parties. 

In  the  case  of  a  promissory  note  there  must  be  a  maker, 
and,  unless  the  note  is  made  payable  to  bearer,  a  payee.  In 
the  case  of  a  bill  of  exchange  or  a  cheque  there  must  be  a 
drawer,  a  drawee,*  and,  unless  the  instrument  is  payable  to 
bearer,  a  payee.  But  all  these  parties,  that  is  maker  and 
payee  in  the  case  of  a  notet  drawer,  drawee,  and  payee  in  the 
case  of  a  bill  or  a  cheque,  may  be  the  same  person.  It  will 
only  be  necessary  to  comment  here  upon  the  subject  of  the 
payee. 

§  3.     The  Payee. 

The  instrument  may  be  payable  to  a  person  named,  or  to 
order,  or  to  bearer.  A,  the  payee,  may  be  the  person  who 
made^t^rcm.H|e^rteLiie^rd^^^ 

a  case^there  is  obviously  no  contract  or  riglit  of^y*9ier^^ 
action  upon  the  instrument  (unless  it  is  a  bill  of  exchange,  or  a 

cheque,  which  the  drawee,  being  a  third  person,  lyi luititkuu  CUtCxft^vL^ 

tti'iurHT.ir),   since   a  man   cannot  contract   with    himself.      This 

1  Bissenthall  v.  Williams,  1  Duv.  329. 

2  Little  V.  Slackford,  Moody  &  M.  171.     Sed  quaere. 
8  Hamilton  v.  Spottiswoode,  4  Ex.  200. 

*  If  no  drawee  is  named  in  a  draft,  the  instrument  may  be  treated  as  a 
promissory  note,  or,  it  is  said,  as  a  bill  of  exchange.  Funk  v.  Babbitt,  166 
111.  408.     Compare  N.  I.  L.  §  24,  5. 


24  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IIL 

remark  will  serve  to  explain  certain  words  of  the  Statute 
in  the  definition  of  a  promissory  note.  Such  an  instrument, 
the  Statute  declares,  is  a  promise  'by  one  person  to  another.^  ^ 
That  is  not  to  be  taken  to  mean  that  the  promise  may  not, 
in  terms,  be  made  to  the  promisor  i*^  it  means  that  the  instru- 
ment is  not  complete  in  the  hands  of  the  promisee  when  he  is 
the  same  person  as  the  promisor^  (ndt  (kc.€<»>v&^  iiv^^^^v^-i^XTu^ 

The  payee  must  be  a  person  certain,  that  is,  existing,  and 
igust  be  ascertainable  at  the  time  of  the  execution  of  the  instr^i- 
Certainty  of  ment,  unless  the  instrument  is  payable  in  terms  or 
paj'ee.  in  lep;al  effect  to  bearer.     Certainty  of  the  parties 

is  as  much  of  the  essence  of  the  instrument  as  certainty  in  any 
other  respect.  But  the  payee  need  not  in  any  case  be  named 
individually;  if  he  is  described  sufficiently  to  be  identifi.ed, 
that  is  enough.  For  examjDle:  'Pay  to  the  executor  of  A, 
deceased,'  is  sufficient  to  satisfy  the  law  merchant.^  It  is  uo 
objection  that  identification  must  be  made  by  external  evidence; 
identification  indeed  would  be  necessary  even  when  the  party's 
individual  name  was  given  in  the  instruments;  though  posses- 
sion of  the  instrument  would  be  presumptive  identification.  ' 
Even  a  mistake  in  the  name  of  the  payee  may,  it  seems,  be 
corrected  in  a  suit  upon  the  instrument.* 

The  instrument  is  payable  to  order  where  it  is  made  or  drawn 
payable  to  the  order  of  a  specified  person,  or  to  him  or  his  order. 
.  It  may  be  payable,  by  the  Statute,  to  the  order  of 
to  order:  two  two  or  more  payees  jointly.*  By  the  Statute  it 
orinore paj ees.  ^^^^^  also,  contrary  to  the  current  of  unwritten  law,* 
be  payable  to  the  order  of  '  one  or  of  some  of  several  payees  ' ;  "^ 

1  N.  L  L.  §  191.  2  Id.  §  ^5,  2. 

8  Adams  v.  King,  16  111.  169  ;  Cases,  14. 

*  Jacobs  V.  Benson,  39  Maine,  132.  s  n.  L  L.  §  15,  4. 

^  Osgood  V.  Pearsons,  4  Graj',  455  ;  Blanckenhagen  t;.  Bliindell,  2  Barn.  & 
Aid.  417  ;  Walrad  v.  Petrie,  4  "Wend.  575  ;  Willoughby  v.  Willoughby,  5  N.  Fi. 
254;  Quinby  v.  Merritt,  11  Humph.  439  ;  Cases,  11.  See  also  Carpenter  v. 
Farnsworth,  106  Mass.  561.  But  see  Westgate  v.  Healy,  4  R.  L  523;  Hop- 
kins V.  Halliburton,  6  Texas  Civ.  Ap.  451. 

'  N.I.  L.  §15,5. 


Sect.  3]  REQUISITES.  25 

and  it  may  be  payable  to  the  order  of  the  holder  of  an  office  for 
the  time  being.^  There  is  probably  no  custom  authorizing  in- 
struments to  be  made  payable  to  the  order  of  less  than  all  the 
payees  (if  there  be  more  than  one),  except  by  way  of  agency. 

An  instrument  payable  to  the  order  of  the  cashier  or  other 
fiscal  officer  of  a  bank  is,   by  the  law  merchant,  payable  pre- 
jsumptively  to  the  order  of  the  bank  as  the  princi-  „      , . 
pal.'^     And  the  Statute  has  extended  this  rule  to  cashier  of  cor- 
corporations  generally.^     This    is  an  exception  to 
the  general  rule,   that  the  instrument  itself  must  disclose  the 
parties  to   it;    but  it  is  an  exception   which  the   custom   first 
created,   and  stands  therefore  on  solid  ground.     The   effect  of 
the  rule,   whether  jinder  the  Statute   or  not,  appears  to  be  to 
permit  indorsement  either  by  the  agent  or  by  the  principal. 

An  instrument  may  be  made  payable  to  bearer  either  in  terms 
or  by  implication  of  law.  It  may  be  so  payable  by  implication 
of  law  in  various  ways.  One  way  would  be  to  Paj'able  to 
make  use  of  some  word  or  phrase  not  purporting  ^^*'■«'■• 
to  be  the  name  of  any  person,  as  for  instance,  'Pay  to  bills 
payable  or  order,'  or  to  'sundries,'  'cash,'  or  the  like.*  Another 
way  of  making  an  instrument  payable  to  bearer,  where  it  is  not 

1  N.  I.  L.  §  15,  6.  By  the  Bills  of  Exchange  Act,  'A  bill  may  be  made 
payable  to  two  or  more  payees  jointly,  or  it  may  be  made  payable  in  the 
alternative  to  one  of  two,  or  one  or  some  of  several  payees  .  .  .  also  ...  to 
the  holder  of  an  office  for  the  time  being.     §  7,  (2). 

2  First  National  Bank  v.  Hall,  44  N.  Y.  395  ;  Lookout  Bank  v.  Aull,  93 
Tenn.  645  (that  the  bank  in  such  a  case  ma}'  sue,  without  indorsement  by  the 
payee-cashier  ;  as  to  which  the  rule  is  said  to  have  been  otherwise,  formerly). 
See  Falk  v.  Moebs,  127  U.  S.  597,  as  to  which  see  Hately  v.  Pike,  162  111.  241, 
245. 

^  N.  I.  L.  §  49  :  '  Where  an  in.strument  is  drawn  or  indorsed  to  a  persoa 
as  cashier  or  other  fiscal  officer  of  a  bank  or  corporation,  it  is  deemed  prima 
facie  to  be  payable  to  the  bank  or  corporation  of  which  he  is  such  officer, 
and  may  be  negotiated  by  either  the  indorsement  of  the  bank  or  corporation 
or  the  indorsement  of  the  officer.' 

^  N.  I.  L.  §  16,  4.  See  Mechanics' Bank  v.  Stratton,  3  Keyes,  365;  Willeta 
V.  Phceuix  Bank,  2  Duer,  121. 


26  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  Ill, 

so  in  terms,  but  in  terms  is  payable  to  order,  would  be  for  the 
person  to  whose  order  it  is  payable  to  indorse  it  iu  blank.^ 

Making  the  instrument  payable  to  the  order  of  a  fictitious 
or  non-existing  person  has  given  trouble.  It  is  agreed  by  the 
^.   .  .  authorities   that   if   the    maker  or  drawerjiLJilie 

Fictitious  or         _  ■  . —    — "      ,   . 

non-existing  mstrument  knew  that  such  •'  person  was  fictitious 
^^y^^-  or   non-existing,    the  paper  is   payable   to   bearer. 

And  some  authorities  consider  it  essential  to  treating  the  paper 
as  payable  to  bearer,  that  the  maker  or  drawer  should,  when 
executing  the  instrument,  k7iow  that  the  payee  is  a  fictitious  or 
non-existing  person.'-^  Other  authorities  declare  that  notwith- 
standing the  fact  that  the  maker  or  drawer  supposed  that 
the  payee  was  a  real  person,  still  indorsement  (though  wrong- 
ful) of  the  name  of  the  fictitious  or  non-existing  payee  makes 
the  instrument  payable  to  bearer  in  the  hands  of  a  holder  for 
value  without  notice.'  Perhaps,  indeed,  the  instrument  would 
be  payable  to  bearer,  according  to  these  authorities,  as  it  was 
executed;  that  is,  without  any  indorsement. 

Neither  the  American  nor  the  English  Statute  requires 
indorsement  in  such  cases ;  the  paper  as  executed  in  favor 
of  the  fictitious  or  non-existing  payee  is  payable  to  bearer. 
But  the  two  statutes  differ  like  the  authorities  just  mentioned. 
By  the  American  Statute,  the  instrument,  to  be  payable  to 
bearer,  must  be  executed  by  the  maker  or  drawer  with  knowl- 
edge that  the  payee  is  fictitious  or  non-existing;  while  by  the 
English  Statute  that  is  not  necessary.* 

1  N.  I.  L.  §  16,  5. 

^  *  Only  such  paper  as  is  issued  to  a  fictitious  payee  or  indorsee  by  the 
party  sought  to  be  bound,  with  full  knowledge  of  the  fact,  shall  be  treated  as 
payable  to  bearer.'  Chism  v.  Bank,  96  Tenn.  641,  645  ;  First  National  Bank 
V.  Farmers'  Bank,  56  Neb.  149;  Armstrong  7\  National  Bank,  46  Ohio  St. 
612  ;  Shipman  v.  Bank  of  New  York,  126  N.  Y.  318. 

3  Kahn  v.  Watkins,  26  Kans.  619  ;  Glutton  v.  Attenborough,  1895,  2 
Q.  B.  707,  C.  A.,  affirming  id.  306,  on  the  English  Bills  of  Exchange  Act. 
See  also  Bank  of  England  v.  Vagliano,  1891,  A.  C.  107,  reversing  23  Q.  B. 
Div.  243,  and  22  Q.  B.  D.  103 ;  Meriden  Bank  v.  First  National  Bank,  33 
K.  E.  R.  247,  and  34  N.  E  R.  608  (Ind.). 

*  N.  I.  L.  §  16,  3:  'The  instrument  is  payable  to  bearer  .  .  .  when  it  is 
payable  to  the  order  of  a  fictitious  or  non-existing  person  and  such  fact  was 
known  to  the  person  making  it  so  payable. '     The  contrary  is  probably  to  be 


Sect.  4.]  REQUISITES.  27 

§  4.    Money. 

That  all   these  instruments  must  be  payable  in  money  has 

always  been  held  essential,  and  the  custom  of   merchants    to 

that  effect  has  received  the  sanction  of  statute,  —  „ 

rromise  or 

the    statutes    merely   expressing  the    force    of    the  order  to  pay 
custom.     Thus  in  England,  the  Statute  of  Anne  ™°"®y" 
already  referred  to,  by  which  promissory  notes   were  adopted 
into  the  law,  refers  in  terms  to  promises  to  pay  'money;'  and 
the  same  word  is  used  in  the  similar  American  statutes.^ 

By  '  money  '  is  meant,  in  strictness,  that  which  by  law  is 
tenderable  for  debt,  that  is,  assuming  that  no  provision  is  made 
for  payment  in  anything  else.  If  the  instrument  ^jj^j  jg  nieant 
is  not  payable  in  money,  or  in  what  the  courts  by 'money.' 
judicially  know  to  be  equivalent  to  money,  it  is  not  an  instru- 
ment of  the  law  merchant.  For  example  :  *  We  promise  to  pay 
A  or  order  !|1000  in  cotton'  is  not  a  promissory  note.''  Again  : 
'  Pay  to  A  or  order  £1000  in  good  East  India  bonds  '  is  not  a 
bill  of  exchange  (or  a  cheque).^  Again  :  '1  promise  to  pay  A 
or  order  $140  in  carpenter's  work  '  is  not  a  promissory  note.* 
Again :  '  Pay  A  or  order  f  1000  in  current  funds  '  or  '  in  cur 
rency'   is  by   some   courts   deemed  not  a  bill   (or  a  cheque).^  "*"**-* ^^*-*' 

inferred  where  '  such  fact '  was  not  known  to  the  maker  or  drawer.  Bills  ^^^^^ 
of  Exchant^e  Act,  §  7,  3 :  '  "Where  the  payee  is  a  fictitious  or  non-existing  r*"^!^ 
■person,  the  bill  may  be  treated  as  payable  to  bearer.' 

1  N.  I.  L.  §  8,  2  :  A  negotiable  instrument  must  contain  a  'promise  or 
order  to  pay  a  sum  certain  in  money.'  The  same  would  be  true  of  a  non- 
negotiable  bill,  note,  or  cheque,  under  the  law  merchant. 

3  Auerbach  v.  Pritchett,  58  Ala.  451 . 

3  Buller,  N.P.  272  ;  Chalmers,  Bills,  13  (Benjamin). 

*  Quinby  v.  Merritt,  11  Humph.  439. 

6  Wright  V.  Hart,  44  Penn.  St.  454.  But  see  White  v.  Richmond,  16 
Ohio,  5  ;  Klauber  v.  Biggerstaff,  47  Wis.  551.  See  Frank  v.  Wessels,  64  N.  Y.  . 
155.  It  has  often  been  held  that  instruments  payable  in  current  bank  notes 
are  not  payable  in  money.  See  the  cases  just  cited,  and,  among  others,  Little 
V.  Phenix  Bank,  7  Hill,  359,  affirming  2  Hill,  425 ;  McDowell  v.  Keller, 
4  Cold.  258;  Irvine  v.  Lowry,  14  Peters,  293.  In  Graham  v.  Adams,  5  Ark. 
261,  it  was  held  that  a  note  or  bond  payable  '  in  good  current  money  of  the 
State'  was  payable  in  gold  and  silver.  To  the  same  effect,  Cockrill  i'.  Kirk- 
patrick,  9  Mo.  688.  Secus  of  a  promise  to  pay  '  in  Arkansas  money  of  the 
Fayetteville  Branch.'     Hawkins  v.  Watkins,  5  Ark,  481.     Further,  see  the 


28  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  III. 

Again :  *  We  promise  to  pay  to  the  order  of  A,  twelve  months 
after  date,  in  Buffalo,  N.  Y.,  $2500,  in  Canada  money,'  being 
a  New  York  contract,  is  not,  it  is  held,  a  promissory  note,  be- 
cause it  is  not  payable  in  the  money  of  this  country  or  in  what 
the  court  can  judicially  know  to  be  the  equivalent.^ 

The  rule  itself  is  accepted  by  all  courts  ;  but  the  courts  have 
not  been  agreed  in  regard  to  its  meaning,  as  cases  referred  to  in 
the  authority  last  cited  show.  Indeed,  that  authority  itself  has 
been  criticised,  though  in  a  case  clearly  distinguishable.^  The 
difiSculty  lies  in  what  is  to  be  accepted  as  judicially  known  to 
be  equivalent  to  money.  It  is  hardly  safe  to  call  anything  the 
equivalent  of  money  on  the  ground  that  it  passes  as  such  at 
certain  places;  such  a  rule  would  admit  into  the  company  of 
promissory  notes  promises  to  pay  in  wool  or  in  tobacco,  it  may 
be,  in  some  places,  where  in  the  absence  of  money  such  things 
may  happen  to  pass  current  as  payment.  Nor  is  it  safe  to  treat 
currency,  unless  it  is  the  currency  of  the  nation,  as  equivalent 
to  money  ;  for  currency  is  apt  to  fluctuate,  that  is,  to  fall  from 
its  face  value.  The  most,  it  seem_s,  that  the  law  should  allow 
would  be  a  promise  to  pay  ii^  current  money  of  a  ^particular 
kmc 

In  some  States  promises  to  pay  in  things  not  money  have 
been  treated  as  standing  in  part  on  the  footing  of  paper  of  the 
Payable  not  in  ^^^^  merchant.  The  presumption  of  consideration 
money.  j^^s  been  applied  to  them  ;  while  negotiability  has 

been  denied  them.*     But  the  favor  is  generally  considered  as 

cases  cited  in  Thompson  v.  Sloan,  23  Wend.  71.  By  N.  I.  L.  §  13,  5, 
the  validity  and  negotiable  character  of  an  instrument  are  not  affected  by  the 
fact  that  it  designates  a  particular  kind  of  current  money  for  payment. 

1  Thompson  v.  Sloan,  23  Wend.  71. 

*  Black  V.  Ward,  27  Mich.  191,  194.  There  has  been  an  inclination  to 
favor  the  paper  where  the  sum  is  payable  in  the  local  State  currency.  Mitchell 
V.  Hewitt,  5  Smedes  &  M.  361  ;  Drake  v.  Markle,  21  Ind.  433  ;  Butler  v. 
Paine,  8  Minn.  324;  Cockrillw.  Kirkpatrick,  9  Mo.  688  ;  White  v.  Richmond, 
16  Ohio,  5;  Swetland  v.  Creigh,  15  Ohio,  118. 

3  Jones  V.  Fales,  4  Mass.  245,  254.  See  also  Denison  v.  Tyson,  17  Vt. 
549  ;  Dewey  v.  Washburn,  12  Vt.  580. 

fi'N.  I.  L.  §  13,  5.     '  Current  funds '  now  meana  national  currency  and 
therefore  money.    Bull  v.  Bank,  123  U.  S.  105. 


Sect.  6.]  REQUISITES.  29 

misplaced;  the  fact  that  the  paper  is  payable  in  commfldiii£a 
being  deemed  enough  to  put  it  upon  the  footing  of  an,  ordinary 
contract  of  the  common  law. 


§  5.     Certainty  of  Sum. 

Further,  the  sum  payable  must  be  certain.^  But  the  mean- 
ing to  be  given  to  the  rule  is  in  certain  respects  a  matter  of 
doubt.  It  is  clear  that  the  sum  cannot  be  fluctuat-  Meaning  of  cer- 
ing  so  as  to  be  unascertainable  at  the  time  of  taintyofsum. 
making  the  instrument,  as  where  it  is  to  rise  or  fall  indefinite/// 
according  to  the  happening  of  an  uncertain  event.  For  ex- 
ample (hypothetical)  :  '  Pay  to  A  or  order^  thirty  days  after 
sight,  $1000  or  less  according  to  the  market  value  of  10  shares 
of  Moon  Mining  stock  at  that  time  '  would  not  be  a  bill  of 
exchange  for  want  of  designation  of  a  sum  certain. 

Indeed  upon  the  principle  that  the  instrument  should  not  call 
for  external  evidence,  the  case  could  not  be  different  where  the 
only  uncertainty  was  between  two  fixed  sums,  as  in  the  case  of  a 
proriiise  or  an  order  to  pay  $1000,  or  $500  if  a  particular  event 
happened  before  the  time  of  payment  of  the  larger  sum.^  Here 
the  sum  would  be  ascertainable  at  the  outset;  it  would  be  either 
$1000  or  $500;  there  could  be  no  indefinite  fluctuation  in  such 
a  case.'  But  external  evidence  would  be  required,  in  regard  to 
the  happening  of  the  event,  which  would  be  fatal.  For  example  : 
'  Two  years  from  date,  for  value  received,  we,  or  either  of_us, 
promise  to  pay  to  W  or  bearer  $60,  with  use ;  said  W  agrees  that 
if  $50  be  paid  on  the  first  day  of  January,  1843,  it  shall  cancel 
this  note  ; '  that  is  deemed  not  a  promi'ssory  note.* 

Greater  difficulty  arises  with  regard  to  cases  where  the  prin- 
cipal sum  payable  is  certain,  but  to  it  something  further  is  to  be 
added  in  a  subsidiary  way,  dependent  upon  some  event,  or  un- 

1  N.  I.  L.  §  8,  2.     See  also  §  9. 

2  Roads  V.  Webb,  91  Maine,  406;  Marrett  v.  Equitable  Ins.  Co.,  54  Maine, 
637  ('  with  such  additional  premiums  as  may  become  due  ');  Dodge  v.  Emer- 
son, 34  Maine,  96;  Fralick  v.  Norton,  2  Mich.  130. 

8  Compare  the  case  of  time  of  payment  'on  or  before,'  infra,  p.  30. 
*  Fralick  v.  Norton,  2  Mich.  130. 


30  BILLS,  NOTES,  AND  CHEQUES.  [Cuap.  IIL 

certain  in  amount.  In  some^  parts  of  the  country  it  is  not 
uncommon  to  add  to  the  principal  sum  promised  another  stated 
sum  by  way  of  attorney  fee,  in  case  suit  should  be  brouglit  upon 
the  instrument.  In  many  cases  it  has  been  held  that  this  addi- 
tional stipulation,  if  it  does  not  operate  until  after  dishonor, 
does  not  affect  the  nature  of  the  instrument.^  But  in  other 
cases  the  contrary  is  held  ;  "^  and  in  some  cases  it  is  held  tliat  the 
addition  may  violate  the  usury  laws,  or  other  statutes,  or  public 
policy,  and  for  that  reason  render  the  instrument  void  or  subject 
to  any  special  provision  of  the  laws.^  Another  instance  of  the 
difficulty  occurs  where  payment  is  promised  at  a  stated  time  '  or 
before,'  with  deduction  of  interest  for  the  time  if  payment  is 
made  before  the  day  set.  Some  of  the  courts  have  held  that  the 
sum  payable  is  rendered  uncertain  by  the  uncertainty  of  the 
provision  for  anticipation  ;  *  other  courts  would  hold  the  con- 
trary, on  the  ground  that  it  is  enough  that  the  principal  sum 
payable,  in  such  cases,  is  certain.^  The  latter  is  the  better 
rule.®  Still  another  instance  occurs  where  the  promise  to  pay 
is  '  with  current  exchange.'  A  similar  conflict  of  authority  ex- 
ists in  regard  to  such  cases  ;  but  the  better  rule,  and  the  weight 

1  N.  L  L.  §  9,  5;  Farmers'  Bank  i'.  Sutton  Co.,  6  U.  S.  App.  312  ;  3  C.  C. 
A.  1  ;  .52  Fed.  R.  191  ;  Oppenheinier  v.  Bank,  97  Tenn.  19 ;  Sperry  i-.  Horr, 

32  Iowa,  184  ;  Seaton  v.  Scovill,  18  Kans.  433  ;  Garr  v.  Louisville  Banking 
Co.,  11  Bush,  180  ;  Stoneman  v.  Pyle,  35  Ind.  103  ;  Nickerson  v.  Sheldon, 

33  111.  372  ;  Dietrich  v.  Bayhi,  23  La.  An.  767. 

'^  Woods  V.  North,  84  Penn.  St.  407  ;  First  National  Bank  v.  Gay,  63  Mo. 
33  ;  Roads  v.  Webb,  91  Maine,  406,  and  cases  cited. 

3  Witherspoon  v,  Musselman,  14  Bush,  214;  Shelton  v.  Gill,  11  Ohio, 
417  ;  Myer  v.  Hart,  40  Mich.  517. 

<  Stults  V.  Silva,  119  Mass.  137  ;  Way  v.  Smith,  111  Mass.  523;  Hubbard 
V.  Mosely,  11  Gray,  170. 

&  See  Buchanan  v.  Wren,  17  Texas  Civ.  Ap.  560  ;  Albertson  v.  Laughlin, 
173  Penn.  St.  525;  Beatty  v.  Western  College,  177  111.  280,  289  ;  Helmer  v. 
Krolich,  36  Mich.  371  ;  Mattison  v.  Marks,  31  Mich.  421,  doubting  Hubbard 
f.  Mosely,  supra.  The  question  in  these,  as  in  some  of  the  Massachusetts 
cases,  related  to  certainty  of  time,  but  there  would  be  the  same  question  of 
certainty  in  amount  ordinarily. 

^  N.  I.  L.  §  11,  2  :  'An  instrument  is  payable  at  a  determinable  future 
time,'  when  payable  'on  or  before  a  fixed  or  determinable  future  time  specified 
therein.' 


Sect.  5.]  REQUISITES.  31 

of  authority,  treat  the  provision  as  not  affecting  the  subject  of 
certainty  of  amount.^ 

To  make  the  instrument  payable  in  stated  instalments  will 
not  affect  its  character  ;  '^  nor  would  indorsement  of  payments  of 
the  principal  affect  it,  for  it  would  still  remain  certain  how 
much  was  due." 

Provisions  accelerating,  with  certainty,  the  time  of  payment, 

on  non-payment  of  interest,  or  of  instalments  of  principal,  when 

due  have  no  effect  upon  the  character  of  the  paper  ;  Accelerating 

that  is,  they  do  not  make  the  sum  payable  uncer-  time  of  pay- 

,,„,,,,,.  ,        ment. 

tain.*     For  example  :    The  defendant  is  guarantor 

and  the  plaintiff  is  holder  of  an  instrument  promising  to  pay  a 

certain  sum  of  money,  with  interest  in  instalments,  and  being 

thus  far  a  promissory  note,  but  with  an  added  provision  that  in 

case  of  default   in  the   payment  of  any  instalment  of  interest 

when  due,  the  principal  sum  shall,  at  the  holder's  election,  at 

once  become  due.     The  instrument  is  a  promissory  note,  the 

added  provision  not  affecting  it   in  that  respect.*     The  same 

would  be  true  of  a  provision  in  regard  to  default  in  payment  of 

any  one  of  a  series  of  notes. * 

1  N.  I.  L.  §  9,  4  :  '  "Whether  at  a  fixed  rate  or  at  the  current  rate.'  See 
also  Hastings  v.  Thompson,  55  N.  W.  Rep.  968  ;  Smith  v.  Kendall,  9  Mich. 
241;  Johnson  v.  Frisbie,  15  Mich.  286;  Sperrj^  v.  Horr,  32  Iowa,  184.  Con- 
tra, Culbertson  v.  Nelson,  93  Iowa,  187  ;  Lowe  v.  Blisa,  24  111.  168.  But 
'payable  by  New  York  or  Chicago  exchange'  would  be  a  different  thing. 
The  instrument  would  be  payable  in  bills  of  exchange,  not  in  money.  First 
National  Bank  v.  Slette,  67  Miun.  425.  See  however  Bradley  v.  Lill,  4  Biss. 
473,  where  'in  exchange'  was  construed  to  mean  'with  exchange.' 

2  N.  I.  L.  §  9,  2. 

8  Smith  V.  Shippey,  182  Penn.  St.  24. 

*  N.  I.  L.  §  9,  2,  3  :  '  The  sum  payable  is  a  sum  certain,'  though  payable 
'by  stated  instalments,  with  a  provision  that  upon  default  in  payment  of  any 
instalment  or  of  interest  the  whole  shall  become  due.' 

5  Sea  V.  Glover,  1  Bradw.  (111.)  335  ;  Faut  v.  Wickes,  10  Texas  Civ.  Ap. 
394;  Wilson  v.  Campbell,  110  Mich.  580;  Carlon  v.  Kenealy,  12  M.  &  W.  139. 

6  Chicago  Ry.  Co.  v.  Merchants'  Bank,  136  U.  S.  268.  It  would  be  other- 
wise in  such  cases  if  the  maturity  of  the  instrument  depended  upon  the  elec- 
tion or  action  of  a  third  person,  not  a  party  to  it.  Wilson  v.  Campbell,  supra, 
at  p.  586  ;  Brooks  v.  Hargreaves,  21  Mich.  254.  So  too,  no  doubt,  if  it  da* 
pended  upon  any  other  external  evidence. 


32  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IIL 

§6.     <  Absolutely  ' :  Certainty  of  Time. 

It  is  an  invariable  rule,  or  a  rule  with  at  most  but  a  single 
exception,  that  the  promise  or  order  must  be  absolute ;  any  con- 
dition or  contingency  expressed  in  it  would  have 
TK^conT-'*    tbe  effect  to  reduce  the  instrument  from  the  high 

tional:  partic-    level  of  the  law  merchant  to  the  lower  level  of  the 

ular  fund.  i      mi  t   •  •  i 

common  law.       ihe  condition  or  contingency  need 

not  appear  in  terms,  —  'upon  condition,'  'if,'  'in  the  event 
that,'  or  the  like,  —  in  order  to  defeat  the  instrument  as  a  con- 
tract of  the  law  merchant ;  the  same  effect  is  produced  if  iu 
substance  and  reality  the  promise  or  order  is  conditional  or  con- 
tingent.'^ Thus^  to  make  the  paper  paj'^able  out  of  some  particu- 
lar designated  fund  would  have  that  effect,  in  ordinary  cases, 
because  the  fund  might  not  exist  or  be  available  at  the  time  of 
payment.^  For  example  :  '  One  month  from  date  I  promise  to 
pay  to  A  or  order  $1000  out  of  the  net  proceeds  of  ore  to  be  ob- 
tained from  the  mine  in  the  lot  of  land  this  day  conveyed  to  me 
by  B'  is  not  a  promissorj'  note,  being  payable  upon  the  contin- 
gency of  obtaining  the  required  amount  of  ore  out  of  the  mine.'' 
It  makes  no  difference  that  the  event  upon  which  the  promise 
or  order  is  made  happens,  or  that  the  particular  fund  exists  and 
Happenine  of  ^^  available  when  payment  is  due,  so  that  the  prom- 
cvent  named,  ige  or  order  may  be  binding;  it  is  fatal  to  the  con- 
tract as  a  contract  of  the  law  merchant  that  when  the  promise  or 
order  was  made,  payment  was  dependent  upon  condition  or  con- 
tin  gency.^  For^xample  :  '  Due  K  $1000  when  he  is  twentj^-one 
years  of  age  '  is  not  a  promissory  note,  though  K  lived  to  be- 
come,  shortly  afterwards,  twenty-one7 

1  N.  I.  L.  §10. 

'  A  savings  bank  order,  in  negotiable  terms,  but  with  the  addition,  even  iu 
the  margin  of  the  order,  '  The  bank  book  of  the  depositor  must  accompany 
this  order,*  is  not  negotiable.  The  words  quoted  make  the  order  contingent 
on  producing  the  bank  book.  White  v.  Gushing,  88  Maine,  339 ;  Iron  City- 
Bank  V.  McCord,  139  Penn.  St.  52. 

8   Id. 

*  Worden  v.  Dodge,  4  Denio,  159  ;  Averett  v.  Booker,  15  Gratt.  163,  'out 
of  any  money  in  his  [payee's]  hands  belonging  to  me.' 

'  N.  L  L.  §  11,  3.  6  Kelley  v.  Hemmingway,  13  111.  604. 


Sect.  6.]  REQUISITES.  83 

,  It  may  be  remarked  that  an  order  to  pay  over  the  whole  or 
any  part  of  a  specified  fund  will  ordinari]3'^  amount  to  an  assign- 
ment of  the  same,^  and  that  tliat  of  itself  would  be  „     .„  ,  ,     , 

..,.,,«,  Specified  fund, 

fatal  to   the   conception  of   a  bill  of   exchange  or 

a  cheque.  A  bill  or  a  cheque  can  rise  no  higher  than  an  un- 
dertaking; it  signifies  a  debt,  not  a  transfer  of  money  or  other 
property. 

Apart  from  statute,  it  will  not  affect  the  instrument  under  the 
law  merchant  that  language  is  added  to  it,  provided  the  addi- 
tional language  does  not  make  the  promise  or  order  Added  Ian- 
conditional  or  contingent.  To  add  a  provision  for  S^^S^- 
reimbursement,^  in  the  case  of  an  order  to  pay,  would  not 
affect  the  paper  as  a  bill  of  exchange,  for  that  would  not  be 
directing  payment  to  be  made  out  of  the  particular  fund  or 
source ;  and  whether  the  fund  or  source  for  reimbursement 
existed  or  was  available  would  make  no  difference.  For 
example :  *  Pay  to  the  order  of  A  $1000,  one  month  from  date, 
and  reimburse  yourself  out  of  funds  in  your  hands  due  me  '  is  a 
bill  of  exchange,  regardless  of  the  reimbursement  clause  ^  or  of 
the  existence  of  any  debt  due  the  drawer.  Again  :  '  On  the  1st 
of  August  next  please  pay  to  G  or  order  £600,  on  account  of 
moneys  advanced  by  me  to  S,'  is  a  bill  of  exchange  regardless 
of  the  clause  following  the  sum.*  So  too  the  consideration  for 
the  undertaking  may  be  stated,  if  no  condition  is  created  in  the 
promise  or  order.  For  example:  '  Pay  to  A  or  order  $1000  one 
month  from  date,  for  stock  '  is  a  bill  of  exchange.^  It  is  perhaps 
immaterial,  in  the  absence  of  statute,  that  the  additional  lan- 
guage may  express  a  condition  or  contingency,  provided  that  the 
condition  or  contingency  is  no  part  of  the  promise  or  order  to 
pay.  That  is  to  say,  to  a  note,  a  bill,  or  a  cheque  may  be  added 
a  contract  of  the  common  law,  as  has  already  been  stated. 

1  See  Attorney-Gen.  v.  Continental  Ins.  Co.,  71  N.  Y.  325. 

2  N.  I.  L.  §  10,  1. 

8  Kelly  V.  Brooklyn,  4  Hill,  263  ;  Coursin  r.  Ledlie,   31  Penn.  St.  506  ; 
Corbett  V.  Clark,  45  Wis.  403. 

<  Griffin  V.  Weatherby,  L.  R.  3  Q.  B.  753  (overruling  Banbury  v.  Lisset, 
2  Strange,  1211);  N.  I.  L.  §  10,  1. 

6  See  Coffman  v.  Campbell,  87  111.  98 ;  N.  I.  L.  §  10,  2. 

3 


34  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IIL 

It  may  sometimes  require  careful  consideration  to  determine 
whether  the  additional  language  forms  part  of  the  promise  or 
„  ,     .  order.     Thus,   while  it  is  clear  that  the  fact  that 

Kefernng  to  .  .      ,       . 

collateral  se-      it    IS    recited     in     an    instrument    promising    to 

cun  y.  p^^  money,  that   other  paper   or   property   is   de- 

posited with  it  as  collateral,  and  that  the  same  may  be  sold  if 
such  instrument  is  not  paid  at  its  maturity,  will  not  prevent 
that  instrument  from  being  a  promissory  note;^  still  if  it  is 
recited  in  the  instrument  that  the  instrument  itself  is  held  as 
collateral,  it  will  be  perceived  upon  reflection  that  the  contrary 
is  true  and  that  the  promise  is  now  made  conditional.  For 
example  :  '  Six  months  after  date  I  promise  to  pay  to  the  order 
of  myself  $2400,  value  received,  to  be  held  as  collateral  security 
for  the  payment  of  B's  note,  December  5th,  6  months,  for 
$968.41,'  and  other  notes,  is  not  a  promissory  note;  for  in  legal 
effect  it  is  a  promise  to  pay  if  the  notes  to  which  it  is  collateral 
are  not  paid.*  So  too  while  an  insurance  note  is  not  reduced  to 
a  contract  of  the  common  law  by  adding  the  words  '  On  policy 
33,386,"  the  contrary  would  be  true  if  the  words  were  'subject 
to  the  policy,'  or  the  like.* 

But  the  Statute,  following  custom  and  hence  pursuing  sound 
theory,  declares  that  an  instrument  which  contains  an  order  or  a 
promise  to  do  anything  in  addition  to  the  payment  of  money  is 
not  negotiable,  with  certain  exceptions,  to  wit  :  The  order  or 
promise  may  be  coupled  with  an  indication  of  a  particular  fund 
out  of  which  reimbursement  is  to  be  made,  or  a  declaration  that 
a  particular  account  is  to  be  debited  with  the  amount,  or  a 
statement  of  the  transaction  which  has  given  rise  to  the  instru- 
ment.^ The  Statute  also  permits  the  addition  of  provisions 
authorizing  the  sale  of  collateral  securities  on  non-payment  of 
the  instrument  at  maturity,  for  confessing  judgment,  for  waiving 
any  law  intended  for  the  benefit   of  the  obligor,  and  for  giving 

1  N.  I.  L.  §  12,  1. 

2  Haskell  v.  Lambert,  16  Gray,  592. 

'  Taylor  v.  Curry,  109  Mass.  36.  The  policy  provided  for  a  set-oflF  of 
notes  due  the  company. 

*  American  Bank  v.  Blanchard,  7  Allen,  333. 
6  N.  L  L.  §  10. 


SkcT.  6.J  REQUISITES.  35 

the  holder  an  election  to  require  something  to  be  done  in  lieu 
of  payment  of  money. ^ 

The  promise  or  order  is  not  conditional,  touching  parties  pri- 
marily liable,  by  reason  of  the  fact  that  it  designates  a  particu- 
lar place  of  payment:  nor  is  acceptance  conditional  „i        .        -Ji^*^  |rr~»>i 

.  •  Place  of  payx'x^l  4*»<4».  < 

towards    the   acceptor,  for  designating  a   place   of  mentdesi^-^     ^^^w^^-^rm. 

payment  at  that  or  at  any  other  place  in  order  to  fix  the  liabil- 
ity of  the  maker  or  the  acceptor;  it  is  the  duty  of  such  party  to 
come  and  pay."^  For  example :  '  Three  years  and  two  months 
after  date  I  promise  to  pay  M  or  order,  at  the  office  of  the  Bank 
of  the  United  States,  at  Nashville,  $4880.99,  value  received,'  is 
a  promissory  note,  and  not  conditional,  touching  the  liability  of 
the  maker,  upon  demand  at  the  place  named  or  anywhere  else.^ 
Nor  is  an  instrument  payable  on  condition  of  demand,  against 
parties  primarily  liable,  though  it  is  in  terms  payable  '  on 
demand.'  * 

It  is  obvious,  and  the  fact  has  already  been  noticed  incident- 
ally, that  the  promise  or  order  is  not  performable  absolutely  if 
the  time  of  payment  is  not  certain  to  come  to  pass.  -j.j^g  ^^  _ 
For  example :  '  I  promise  to  pay  to  A  or  order  '"eut. 
$1000  when  the  estate  of  B  is  settled  up '  is  deemed  not  a 
promise  to  pay  absolutely,  because  the  estate  of  B  may  never  be 
'settled  up.'^  Again:  'I  promise  to  pay  to  A  or  order  #1000 
as  soon  as  crops  can  be  sold  or  the  money  raised  from  any  other 
source  '  is  not  a  promise  to  pay  absolutely.®  Again:  '  At  sight 
after  the  arrival   and  discharge   of  coal  per  brig  G  pay  to  the 

1  N.  I.  L.  §  12.  Compare  Kirkvvood  v.  Smith,  1896,  1  Q.  B.  582,  on  §  83 
of  the  Bills  of  Exchange  Act.  With  the  American  Statute  compare  §  3*  (2), 
(3)  of  that  Act. 

3  N.  I.  L.  §  77  :  '  Presentment  for  payment  is  not  necessary  in  order  to 
charge  the  person  primarily  liable  on  the  instrument.'  Id.  §  147  :  '  An  accept- 
ance to  pay  at  a  particular  place  is  a  general  acceptance,  unless  it  expressly 
etates  that  the  bill  is  to  be  paid  there  only  and  not  elsewhere.' 

»  Wallace  v.  McConnell,  13  Peters,  136. 

*  Messmore  v.  Morrison,  172  Penn.  St.  300. 
»  Husband  v.  Epling,  81  111.  172. 

•  Nunez  V.  Dautel,  19  Wall.  560. 


36  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  Ill 

order  of  myself  $1500,  value  received, '  is  not  an  order  to  pay 
absolutely.^ 

Certainty  of  time,  however,  does  not  mean  a  fixed  and  stated 
day  of  month  and  year;  or  as  it  is  sometimes  put,  certainty 
here  does  not  mean  definiteness.  Nothing  is  more  common 
than  promises  to  pay  'on  demand,'  or  orders  to  pay  'at  sight,' 
or  at  a  certain  time  'after  sight; '  sometimes  indeed  instruments 
are  made  payable  '  after  date '  simply,'^  or  '  on  demand  after 
date."  All  such  instruments  are  as  good  promissory  notes  or 
bills  of  exchange  as  if  payment  were  to  be  made  upon  a  day 

stated. 

All  that  the  law  requires  is  that  the  time  of  payment  shall  be. 
sure  to  arrive,  as,  for  instance,  in  the  case  of  a  promise  to  pay 
on  the  death  of  a  person  named.  Indeed,  absolute  certainty 
appears,  by  some  decisions,  not  to  be  required;  moral  certainty 
being  deemed  sufficient,  as  in  the  case  of  a  promise  by  the 
government  to  pay  a  sum  when  it  pays  certain  other  debts 
which  it  owes.*  But  that  doctrine  cannot  be  founded  upon 
any  custom,   and  should  be  taken  with  hesitation. 

Some  confusion  exists,   as  certain  of  the   examples  already 
given  and  others  show,  in  regard  to  the  meaning  of  the  rule  in 
cases  in  which  the  time  of  payment  is  left  indefi- 
finTd:  'on  or      nite,  without  giving  power  to  the  holder  to  put  an 
before.'  ^^^  ^^  ^^^  indefiniteness.     But  by  the  better  view 

such  a  state  of  things  will  not  prevent  the  paper  from  being  a 
promissory  note  (or  a  bill  of  exchange  if  one  should  ever  be 
drawn  in  that  way).  If  the  time  of  payment  is  sure  to  come  to 
pass  sooner  or  later,  that  is  enough;  when,  sooner  or  later,  it 
does  come  to  pass,  the  instrument  may  be  sued  upon,  in  case  of 
breach,  as  a  promissory  note. 

1  Grant  v.  Wood,  12  Gray,  220. 

2  Hotel  Lanier  v.  Johnson,  103  Ga.  604. 

3  Hitchings  v.  Edmands,  132  Mass.  338;  Foley  u.  Emerald  Brewing  Co., 
61  N.  J.  428  ;  Grim  v.  Starkweather,  88  N.  Y.  340.  In  the  first  of  these  cases 
the  instrument  is  held  (by  a  majority  of  the  court)  to  be  due  at  once  on  de- 
mand ;  in  the  other  cases  it  is  held  payable  only  after  some  reasonable  lapse 
of  time  after  date. 

*  Andrews  v.  Franklin,  1  Strange,  24 ;  Evans  v.  Underwood,  1  "Wils.  262. 


Sect.  6.]  REQUISITES.  37 

Confusion  on  this  point  has  arisen  in  recent  cases  of  promises 
to  pay  at  a  time  stated  'or  before,'  at  the  maker's  election.^ 
But  the  instrument  is  payable  at  the  time  stated  at  all  events; 
the  time  of  payment  is  certain  to  come  to  pass ;  the  maker  may 
choose  to  shorten  the  matter,  —  that  is  all.^  Another  difficulty 
with  such  cases,  arising  from  the  fact  that  the  total  sum  pay- 
able is  in  one  sense  uncertain,   has  already  been  noticed.* 

No  time  of  payment  at  all  need  be  stated;  the  paper  in  that 

case  will  in  law  be  payable  on  demand,*  and  that,  as  has  already 

been  stated,  is  enough.     The  common  cheque  is  a  -^5,^^^  ^^^ 

familiar  example.     An  undertaking  to  pay  within  named: 

^  —     ■    — ~ ^""^ '        reasonable 

a  reasonable  time  is  said  to  meet  the  requirement  01  time :  '  when  ^ 

the  law  merchant;  for  a  reasonable  time  is  deemad  <^o"^^'^'^"  • 
sure  to  come.  And  undertakings  have  been  construed  as  per- 
formable  within  a  reasonable  time  where  the  matter  of  time  was 
left  wholly  indefinite  in  the  language  used.  The  courts  have 
indeed  gone  far  beyond  custom  in  interpreting  'reasonable  time.' 
For  example:  'I  promise  to  pay  to  A  or  order,  $1000  when 
convenient '  is  construed  a  promise  to  pay  within  reasonable 
time,  and  hence  within  a  time  certain.^  Again:  '  I  promise  to 
pay  to  A  or  bearer  $75,  one  year  from  date,  and  if  there  is 
not  enough  realized  by  good  management  in  one  year,  to  have 
more  time  to  pay,'  is  construed  to  be  a  promise  to  pay  within 
a  year,  or  at  the  end  of  a  reasonable  time  thereafter,  if  enough 
should  not  be  realized  out  of  the  business  within  a  year;  and  the 
promise  is  thus  deemed  to  be  performable  at  a  time  certain.® 

Cases  of  the  kind  under  consideration  may  perhaps  be  consid- 
ered more  properly  as  deciding  that  the  instrument  provides  a 
time  of  payment  rather  than  it  is  an  instrument  of  the  law 
merchant.'^      In  that  view   such  instruments  are   simply  valid 

1  Stults  V.  Silva,  119  Mass.  137  ;  Way  v.  Smith,  111  Mass.  523  ;  Hubbard 
V.  Mosely,  11  Gray,  170. 

2  Helmer  v.  Krolich,  36  Mich.  371  ;  Mattison  v.  Marks,  31  Mich.  421. 

3  Ante,  p.  30. 

*  Messmore  v.  Morrison,  172  Penn.  St.  300. 

6  Works  V.  Hershey,  35  Iowa,  340. 

6  Capron  v.  Capron,  44  Vt.  410. 

f  See  Page  v.  Cook,  164  Mass.  116  ('On  demand  after  date     .  .  payable 


38  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  Ill 

contracts  of  the  common  law;  certainly  they  are  not  instru- 
ments of  the  custom  of  merchants.  It  should  be  noticed  that 
such  cases  call  for  external  evidence  of  liability;  which  should 
prevent  them  from  having  a  place  in  the  law  merchant. 

The  time  of  payment  may  be  put  at  the  election  of  the  holder 
not  merely  by  making  the  instrument  payable  in  one  payment 
Payment  in  on  demand,  but  by  making  it  payable  in  parts  at 
instalments.  ^lie  pleasure  of  the  holder.  For  example:  'I 
promise  to  pay  to  A  $125  in  such  manner  and  proportion,  and 
at  such  times  and  place,  as  A  may  require '  is  payable  abso- 
lutely, being  payable  in  law  in  instalments  on  demand.* 

Indeed,  the  time  of  payment  may  perhaps  be  put  in  the 
alternative,  one  of  the  alternatives  being  wholly  uncertain,  if 
Alternative  ^he  holder  has  his  election  which  of  the  alterna- 
*'™^-  tives  to  take;  that  is,  if  the  holder  has  the  right 

to  insist  upon  payment,  at  the  time  certain  set  in  the  instru- 
ment, the  law  merchant  appears  to  be  satisfied. 


§  7.     Signature. 

Any  of  these  instruments  may  be  signed  in  pencil  as  well  as 
in  ink; '  and  though  it  is  unusual  to  sign  in  any  other  way  than 
„       .  by  writing  the  name,  that  is  not  necessary,  provided 

may  be  made:  only  the  signature  adopted  was  intended  as  an  exe- 
cution of  the  particular  contract.  Any  party  may 
sign  with  his  mark  though  able  to  write  his  name,  and  with 
the  same  effect  in  law  as  if  he  had  written  his  signature,*  or  he 
may  substitute  for  his  name  a  cipher,  figures,  or  what  he  will; 
but  if  the  name  of  the  party  is  not  signed,  the  holder  has  it 
to  show  that  what  the  party  did  write  was  intended  to  answer 

when  payor  and  payee  mutually  agree');  Black  v.  Bachelder,  120  Mass.  171 
('payable  as  convenient');  Hawkins  v.  Graham,  149  Mass.  284;  White  v. 
Snell,  5  Pick.  425. 

1  Goshen  Turnpike  v.  Hurtin,  9  Johns.  217.  See  Washington  Ins.  Co.  v. 
Miller,  26  Vt.  77;  White  i;.  Smith,  77  111.  351. 

»  Geary  v.  Physic,  5  Barn.  &  C.  234;  Brown  v.  Butchers'  Bank,  6  Hill, 
443. 

•  Bliss  V.  Johnson,  162  Mass.  323. 


Sect.  7.] 


REQUISITES. 


39 


the  purpose  of  a  signature.^  There  must  be  a  signature  in  some 
form  upon  the  paper  itself.  It  could  not  be  shown  that  the 
want  of  a  signature  was  due  to  mistake  or  oversight;  though 
a  suit  in  equity  might,  it  seems,  be  maintained  in  a  proper 
case  to  correct  an  omission  in  signing  due  to  mistake.' 

'  See  Brown  v.  Butchers'  Bank,  supra,  where  the  figures  '1,  2,  8 '  were 
held  a  good  indorsement  on  evidence  of  the  intention;  and  the  same  case, 
referring  to  George  v.  Surrey,  Moody  &  M.  516,  as  to  signature  by  mark. 

2  See  Lancaster  Bank  v.  Taylor,  100  Mass.  18;  Beard  v.  Dedolph,  29  Wis. 
136 ;  Brown  v.  McHugh,  35  Mich.  50,  52.  These  are  cases  of  omitted 
indorsement;  but  the  principle  is  probably  general. 


fc.-^  ^7  *A. 


H  ^    ^'^'^'-^-^  i.U.1C;X^  /l>^.^iut^  ,  C/  ^  *^'^**^ 


40  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  TV, 


CHAPTER  IV. 
MAKER'S  CONTRACT. 

§  1.     Nature  r  Signature. 

The  contract  of  the  maker  of  a  promissory  note  differs  in  one 
respect  from  that  of  any  other  party  to  a  contract  of  the  law 
^  ,    ,  merchant;    the  writing  itself   shows,    apart   from 

tract  appears      grace,   what  the  contract,  m   terms,    is.     One  has 

erms.  -^^^  ^^  xQ^idi  the  note  to  see  that  it  is  an  absolute 

undertaking  to  pay.^  No  demand  of  payment  is  necessary  to 
fix  the  maker's  liability.  And  besides  the  express  undertaking 
to  pay,  the  maker,  as  incident  to  his  contract,  admits,  in  law, 
the  existence  of  the  payee  (if  a  payee  purporting  to  be  an 
existing  person  is  named),  and  his  capacity  at  that  time  to 
indorse  the  instrument  if  it  is  payable  to  order.* 

The  contract  of  the  maker  may  be  executed  in  any  way,  so  far 
as  his  signature  is  concerned.  By  custom  the  maker  signs  the 
How  executed :  'o.otQ  at  the  right  lower  corner;  but  the  courts 
end  of  note.  appear  to  have  considered  the  custom  as  not  bind- 
ing. The  name  written  by  him  in  any  part  of  the  instrument 
has  been  treated  as  a  sufficient  signature  if  that  was  the  inten- 
tion. It  may  accordingly  be  written  in  the  body  of  the  promise, 
as  where  the  note  reads,  •!,  A  E,  promise  to  pay/  etc..  provided 
^at  it  was  intended  that  the  name  as  written  there  should 
answer  the  purpose  of  a  signature.^  The  Statute  makes  no 
change;  it  simply  defines  a  (negotiable)  promissory  note  as  a 
promise  in  writing,  'signed  by  the  maker,'  without  limitation 

1  Evidence  is  inadmissible  to  show  that  an  oral  agreement  to  renew  the  note 
was  made.  Woods  Co.  v.  Schaeffer,  173  Mass.  443  ;  Hall  v.  First  National 
Bank,  id.  16  ;  Heist  v.  Hart,  73  Penn.  St.  289.  Much  less,  that  the  maker 
was  not  to  be  held  liable.     Gumz  v.  Giegliug,  108  Mich.  295. 

a  N.  I.  L.  §  67. 

«  Taylor  r.  Dobbin,  1  Strange,  399. 


Sect.  2.]  MAKER'S  CONTRACT.  « 

in  regard  to  the  place  of  the  signature.^  The  courts  have 
applied  to  the  case  a  doctrine  of  the  common  law. 

There  is  this  distinction,  however:  Where  the  signature  is 
placed  at  the  end  of  the  note,  the  intention  is  fixed;  the  signing 
in  that  way  is  an  execution  of  the  note  as  matter  of  law,  in  the 
absence  of  fraud  practised  upon  the  maker  in  regard  to  the 
instrument  itself.  But  if  the  signature  be  out  of  the  usual 
place,  it  is  then  a  question  of  fact  whether  the  supposed  signa- 
ture was  intended  as  an  execution  of  the  instrument;  the  bur- 
■^en  being  upon  the  holder  to  show  that  it  was  so  intended.'^ 

The  simplest  kind  of  contract  is  the  one  now  assumed  to  bd 
in  question,  where  the  promise  is  made  by  one  person  only. 
That  is  the  typical  case,  the  case  from  which  all  others  are  more 
or  less  variants. 

§  2.     Joint  and  Several  Signature. 

The  note  may  be  signed  by  more  than  one  person;  and  then, 

according  to  the  intention  manifested,  it  will  be  the  several  note 

of  each,  or  the  joint  note  of  all,  or  it  will  be  either  .„.. 

*  What  consti- 

the  one  or  the  other  as  the  holder  may  choose  to  tutes  joint  sig- 
treat  it.  The  question  which  of  these  it  is,  will 
be  a  question  to  be  ascertained  from  the  writing  itself.  The 
language  of  the  note  may  in  terms  state  the  intention;  as  where 
it  reads, /We  jointly  promise, '  or  'We  jointly  and  severally,' 
or  '  We  or  either  of  us,'  or  'I,  A  B,  as  principal,  and  I,  C  D,  aS 
surety,  jointly  and  severally  promise  ; '  or  the  language  may  not 
in  terms  declare  the  intention.  In  the  latter  case  the  intention 
is  a  matter  for  construction,  on  the  language  used,  the  rule 
whereof  appears  to  be  this :  If  there  is  nothing  to  indicate  a 
different  intention,  the  promise  of  the  makers  is  to  be  deemed 
joint.  For  example" (hypothetical)  :  '  We  promise  to  pay  to  A 
or  order  $1000,  six  months  from  date,'  followed  by  the  signa- 
tures of  the  makers,  would  be  a  joint  promissory  note,  as  there 
is  deemed  to  be  nothing  in  the  language  to  indicate  that  the 

1  N.  I,  L.  §  191. 

2  Compare  In  re  Booth,  127  N.  Y.  109  ;  Watts  v.  Pub.  Admr.,  4  Wend. 
168;  Catlett  v.  Gatlett,  55  Mo.  330;  Armstrong  v,  Armstrong,  29  Ala.  538. 
These  are  cases  of  wills. 


42  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IV 

makers  intended  to  bind  themselves  severally.     On  the  othei 

hand  'I  promise  to  pay,'  signed  by  more  than  one  person,  is  a 

joint  and  sevexailprpmi^.^ 

Where    the   promise   is   joint,  there  is   this   addition  to  the 

typical  case  of  a  promise  by  one  person  onl}',  that  the  promise 

Legal  effect  of    is  now  the  indivisible  undertaking  of  two  or  more.* 

joint  contract :    j^part  from  statute  there  is  deemed  to  be  but  one 

teveral  con-  /  _ 

tract.  right  of  action  for  the  breach  of  the  contract  in  such 

a  case,  and  hence  when  that  right  of  action  is  pursued  to  its  end, 

■fsbviously  nothing  more  can  be  done.     There  are  not  as  many 

rights  of   action  as   there   are   parties ;    and   if   suit  should  be 

brought  against  one  without  objection,  and  judgment  should  be 

obtained  against  him,  then  though  the  judgment  should  prove 

fruitless,  no  action  could  be  brought  against  the  others.'    Where 

the  promise  is  several,  there  are  as  many  rights  of  action  —  on 

which  of  course  as  many  judgments  may  be  obtained  —  as  there 

are  makers;  though  as  there  is  but  one   debt,  one  satisfaction 

satisfies   all    rights  of    action  and  all  judgments.     Where  the 

promise  is  joint  and  several,  the  holder  has  an  election;  he  may 

treat  the  makers  as  liable  in  either  way.* 

One  further  point  touching  joint  promises  may  be  noticed. 

The  promise   may  be   made  by  partners  or  not.     If  made  by 

Partners'  con-     partners,  any  of  the   partnership  may  act  for  the 

tJ'act-  firm;  and  accordingly,  a  refusal  to  pay,    on  the 

day  of  maturity,  made  by  any  one  of  the  partners,  would  be  a 

breach  of  contract  by  all,   for  the  purpose   of  giving  a  valid 

notice  of  dishonor  on  that  day,  though  not  by  the  better  rule, 

for  the  purpose  of  suit.^     But  if  the  joint^  promisors  were_^ot^ 

1  Arbuckle  i;.  Tenipleton,  65  Vt.  205;  N.  L  L.  §  24,  7.     See  ante,  p.  5. 

2  See  ante,  p.  5. 

3  King  V.  Hoare,  13  Mees.  &  W.  494;  Sessions  v.  Johnson,  95  U.  S.  347; 
Bigelow,  Estoppel,  104-109,  5th  ed. 

*  '  If  two  bind  themselves  by  contract  jointly  and  severally,  they  may  both 
be  joined  as  defendants  in  one  action;  or  either  or  each  of  them  may  be  sued 
in  a  separate  action.  For  when  the  contract  is  in  this  form,  the  obligation 
treated  by  it  may  be  treated  as  either  joint  or  several,  at  the  election  of  the 
party  who  is  entitled  to  recover  for  the  breach  of  it.'     Gould,  Pleading,  §  69. 

*  Kennedy  v.  Thomas,  1894,  2  Q.  B.  759,  C.  A.  ;  Osborne  v.  Moncure, 
8  Wend.  170  ;  Smith  v.  Bank  of  Washington,  5  Serg.  &  R.  318  (suit  against 


Sect.  4.]  MAKER'S   CONTRACT.  43 

partners,  andnojagency_exigtedJbet_vy^^  there-conltLJia 

no  brftar.li  of  the  contract  before  the  close  of  the  day  of  maturity. 
except  by  demand  upon  and  refusal  b^'jaJl. 

§  3.     Signing  as  Surety. 

Another  modification  of  the  typical  case  occurs  where  one  of 
the  promisors  undertakes  as  surety.  If  the  fact  of  suretyship  la 
shown  upon  the  note,  the  holder  must  govern  him- 
self accordingly.  The  surety  is  still  a  maker,  — that 
is,  he  promises  to  pay  ;  but  he  promises  sub  modo,  —  he  promises 
subject  to  certain  restrictions  imposed  by  the  suretyship  upon  the 
holder  of  the  note.  The  holder  must  not  have  dealings  affect- 
ing the  contract,  such  as  agreements  to  extend  the  time  of  pay- 
ment, behind  the  surety's  back.^  Otherwise,  however,  the 
surety  stands  in  the  same  situation  as  the  principal  maker. 
If  the  fact  of  the  suretyship  is  a  private  matter,  understood 
only  between  the  principal  and  the  surety  himself,  it  has  no 
bearing  upon  the  rights  of  the  holder;  towards  him  there  might 
as  well  have  been  no  special  understanding.  But  should  bt^ 
have  notice  of  the  understanding  at  the  time  of  taking  the  note, 
or  should  he  afterwards  receive  or  acquire  notice,  then,  by  the 
better  view,  he  would  have  to  govern  his  conduct  as  if  the  fact 
were  shown  upon  the  paper  itself.^ 

§  4.     Signing  as  Agent  or  Representative. 

How  ought  a  man  to  sign  a  promissory  note  who  intends  to 
exempt  himself  from  liability?     This  question  arises  constantly 
in  cases  of  alleged  (or  actual)  agency.^     A,  who  in 
point  of  fact   is  treasurer   or   otherwise  agent  or  agent  or  repre- 

,    ,•  £     -D      \  •  J.  .  sentative. 

representative    ot    r>,    has    occasion    to   execute    a 

promissory  note  solely  on  behalf  of  B;  how  is  he  to  do  it?     If 

indorser).  But  see  Staples  v.  Franklin  Bank,  1  Met.  43  ;  Estes  v.  Tower,  lO'J 
Mass.  65;  Veazie  Bank  i;.  Wynn,  40  Maine,  62;  Dennie  v.  Walker,  7  N.  H. 
201;  Coleman  v.  Ewing,  4  Humph.  241. 

^  On  this  subject  see  a  later  chapter. 

^  The  case  referred  to  in  the  text  is  suretyship  in  the  ordinary  sense,  not 
in  the  sense  which  would  make  an  accommodative  acceptor,  for  example,  a 
surety.     As  to  cases  of  that  sort,  see  Farmers'  Bank  v.  Rathbone,  26  Vt.  19. 

*  An  agent  to  whom  an  instrument  is  payable  or  indorsed,  as  for  collection. 


44  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  ly. 

he  wishes  to  exempt  himself,  he  should  do  so  in  terms  or  by 
plain  if  not  necessary  implication; '  otherwise  his  signature  — 
that  is,  signing  his  own  name  to  the  note  —  will  bind  him  as 
maker,  whether  the  principal  is  bound  or  not. 

The  agent  or  representative  does  not  exempt  himself  from 
liability  within  the  rule  just  stated —  'in  terms  or  by  plain 
if  not  necessary  implication' — by  adding  words  which  are 
merely  descriptive  of  the  position  which  he  holds. ^  It  does  not 
affect  a  man's  liability  in  a  written  (or  a  verbal)  contract  to  de- 
scribe himself;  that  at  most  serves  but  to  identify  him.  Of  this 
nature  the  law  considers  all  such  words  as  'agent,'  'trustee,' 
'treasurer,'  'president,'  'guardian,'  or  the  like,  following  a 
man's  name.^  For  example:  'Two  months  after  date  pay  to 
the  order  of  T  $4469.76,  value  received,  and  charge  the  same 
to  the  account  of  D.  F.  &  Co.,  agts.  Piscataqua  F.  &  M.  Ins. 
Co.,'  binds  D.  F.  &  Co.,  the  added  words  being  deemed  mere 
description  of  the  position  held  by  them;  it  does  not  indicate 
that  the  instrument  was  executed  in  their  office  or  character  of 
agents.^  Again:  'One  year  from  date  we  promise  to  pay  to  A 
or  order  $1000,  value  received.  A  B,  CD,  trustees  of  First 
Parish, '  binds  A  B  and  C  D,  for  the  same  reason.^ 

may  of  course  sue  thereon.     Lehman  v.  Press,  106  Iowa,  389;  Illinois  Con- 
ference V.  Plegge,  177  111.  431. 

1  N.  I.  L.  §  27. 

2  Hately  v.  Pike,  162  111.  241;  First  National  Bank  v.  Wallis,  150  N.  Y. 
455  ;  Ogden  R.  Co.  v.  "Wright,  31  Oregon,  150  ;  Farrell  v.  Reed,  46  Neb.  258  ; 
Bank  v.  Looney,  99  Tenn.  278,  296 ;  N.  I.  L.  §  27 :  '  The  mere  addition  of 
words  describing'  the  signer  'as  an  agent,  or  as  filling  a  representative 
character,  without  disclosing  its  principal,  does  not  exempt  him  from  per- 
sonal liability.'  Nor  is  it  enough  to  disclose  the  principal;  the  undertaking 
should  purport  to  bind  the  principal,  in  order  to  exempt  the  signer  in  that 
way.  Shoe  &  Leather  Bank  v.  Dix,  123  Mass.  148 ;  Cases,  25  ;  Graftoa 
Bank  v.  Wing,  172  Mass.  513,  515  ;  First  National  Bank  v.  Wallis,  150 
N.  Y.  455. 

3  See  Talk  v.  Moebs,  127  U.  S.  597.  But  see  as  to  this  case  Hately  v. 
Pike,  162  111.  241,  245. 

*  Tucker  Manuf.  Co.  v.  Fairbanks,  98  Mass.  101.  It  does  not  affect  the 
case  that  the  instrument  was  a  bill  of  exchange,  of  which  the  '  agents '  were 
drawers. 

'  See  id.  ;  Shoe  &  Leather  Bank  v.  Dix,  123  Mass.  148. 


Sect.  4.]  MAKER'S  CONTRACT.  45 

The  general  rule  is  plain,  —  tlie  language  must  be  interpreted 
by  itself  alone.  If  the  principal  is  to  be  bound  as  a  party  to 
the  instrument,  the  fact  must  appear  in  the  instrument  itself.^ 
The  application  of  the  law  to  all  but  simple  cases  like  those  of 
the  examples  is,  however,  often  troublesome,  and  consequently 
sometimes  inconsistent.  If  in  the  first  of  the  examples  the 
signing  had  been  'D.  F.  &  Co.,  agts.  for  Piscataqua  F.  «&  M. 
Ins.  Co.,'  it  seems  that  D.  F.  &  Co.  would  not  have  been  liable. 
The  instrument  would,  it  seems,  have  shown  '  in  terms '  that 
they  were  acting  in  their  office  and  character  of  agents.^  But 
if  it  had  read  '  D.  F.  &  Co.,  agts.  o/,'  etc.,  the  language  would 
probably  have  been  treated  as  merely  descriptive  of  the  position 
held,  and  hence  not  as  exempting  the  signers.^ 

On  the  other  hand,  while  a  signing  by  '  A  B  for  C  D,'  or  'for 
C  D,  A  B  '  is  the  note  of  C  D,  if  authorized,  though  the  name 
of  C  D  is  not  mentioned  in  the  body  of  the  note,  still  if  the 
note  is  signed  by  the  name  of  the  agent  only,  it  is  laid  down 
that  it  is  his  note  though  the  body  of  the  instrument  make  it  a 
promise  '  for  '  or  *  on  behalf  of '  the  principal.* 

To  exempt  the  '  agent '  from  liability,  and  to  bind  the  prin, 
cipal  on  the  instrument,  in  a  case  in  which  the  agent  might 
have  acted  in  his  character  of  agent,  the  agent  ought  to  name 
his  principal,  and  further  express  the  intention  to  bind  the 
principal  alone,  —  that  is,  he  should  show  that  the  act  is 
the  act  of  the  principal.     But  that  is  not  necessary  merely  to 

^  Fuller  V.  Hooper,  3  Gray,  334,  341  ;  Slawsou  v.  Loring,  5  Allen,  340, 
342.  An  undisclosed  principal  cannot  be  made  a  party  to  a  bill,  note,  or 
cheque,  by  external  evidence,  as  he  may  be  to  a  contract  of  the  common  law. 
Cases  just  cited.  The  difference  between  the  two  systems  of  law  should  be 
well  noticed. 

2  Id.,  referring  to  Ballou  v.  Talbot,  16  Mass.  461,  as  an  authoritative 
decision,  where  a  note  was  signed  '  J  T,  agent  for  D  P,'  and  J  T  was  held 
not  liable.  Jefts  v.  York,  4  Cush.  372  ;  Page  v.  Wight,  14  Allen,  182.  But 
see  DeWitt  v.  Walton,  5  Seld.  571,  where  the  signature  'D  H,  agent  for  the 
Churchman,'  was  held  to  bind  D  H. 

3  Tucker  Manuf.  Co.  v.  Fairbanks,  98  Mass.  101. 

*  Barlow  v.  Congregational  Society,  8  Allen,  460,  463.  Further  see  Early 
V.  Wilkinson,  9  Gratt.  68 ;  1  Daniel,  Negotiable  Instruments,  298  ;  Mechem, 
Agency,  429  et  seq. 


46  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IV 

exempt  the  agent.  If  he  has  exempted  himself  in  terms,  that 
■will  he  sufficient.  For  example :  '  We  as  trustees,  but  not  in- 
dividually, promise  to  pay,'  etc.,  followed  by  the  signatures  of 
the  makers  (with  the  word  '  trustees  '  added),  the  signers  hav- 
ing authority  to  make  the  note  as  trustees,  would  not  bind  the 
signers  personally.* 

It  does  not  impose  liability  upon  the  'agent'  that  words 
which  alone  would  be  mere  description  are  added  to  the  signa- 
ture, if  elsewhere  the  promise  is  jjut  as  the  act  of  the  principal 
(or  as  we  have  just  seen,  if  the  agent  expressly  exempts  him- 
self). For  example:  'I,  as  treasurer  of  the  Congregational 
Society,  or  my  successors  in  office,  promise  to  pay,'  etc.,  signed 
'  S  E,  Treasurer,'  is  not  the  note  of  S  R.^ 

If  the  supposed  agent  had  not  the  authority  ^e  p^ofp-asftH  t^ 
have,  he  will  be  liable ;  by  the  better  view,  for  breach  of  an  im- 
plied  warranty  of  authority  and  not  as  a  party  to  the  wri,^n 
instrument  (as  if  he  had  signed  it  for  himself).^  Whether  this 
doctrine  has  been  changed  or  not  by  the  Statute  is  not  clear. 
The  Statute  declares  that  if  a  person  adds  to  his  signature  words 
indicating  that  he  signs  for  or  on  behalf  of  a  principal,  or  in  a 
representative  capacity,  he  is  not  liable  on  the  instrument  '  if 
he  was  duly  authorized.'  *  The  distinction  is  very  important; 
for  if  the  '  agent '  is  liable  on  the  instrument,  he  will  be  liable, 
if  the  instrument  is  negotiable,  to  remote  holders,  which  would 
not  be  true  if  he  has  only  broken  a  warranty. 

§  5.     Anomalous  Signature  of  Stranger. 

The  last  variant  from  the  typical  case  to  be  noticed  is  an 
anomalous  kind  of  undertaking,  which  has  given  much  trouble. 
Indorsement  '^\\Q  case  is  this :  After  a  promissory  note  has  been 
to°law'^mer-°^  executed  in  the  usual  way,  a  third  person,  who 
chant.  may  of  may  not  have  been  a  stranger  to  the  con- 

sideration between  the  maker  and  the  payee,   puts  his    name 

*  Tucker  Manuf.  Co.  v.  Fairbanks,  98  Mass.  101. 
'  Barlow  v.  Congregational  Society,  8  Allen,  460. 

*  Grafton  Bank  v.  Wing,  172  Mass.  513;  Draper  v.  Massachusetts  Heating 
Co.,  5  Allen,  338  ;  Miller  v.  Reynolds,  92  Hun,  400.  But  see  TayU)r  v.  Davis, 
110  U.  S.  330  ;  Ogden  R.  Co.  v.  Wright,  31  Oregon,  150. 

*  N.  I.  L.  §  27. 


Feci.  6.]  MAKER'S  CONTRACT.  47 

upon   the  back  of  the  paper   (or  anywhere  else,   so  that  it  is 

not  with  that  of  the  maker),  as  a  further  assurance  in  favor  of 

the  payee.  ^     Now  this  act,   apart  from  statute,   is  not  properly 

speaking  an   indorsement;  while   the  paper  is   in  the  hands  of 

the  payee  it  cannot  be  indorsed  by  another,   according  to  the 

unwritten  law  merchant  ;  the  payee  of  paper  payable  to  order 

must  be  the   first  indorser.     The    contract   in  question   is  on© 

*  which  is  not  recognized  by  the  law  merchant '  proper.^ 

It  is  true  that  the  courts  of  some  States  treat  the  party  as  an 

indorser,  as  far  as  they  can;  such  courts  will  not  admit  that  he 

can  be  treated  in  any  way  as  on  the  footing  of  a  ..      ^, 

J         -'  °  How  the  party- 

maker  of  the    note,    and    probably    that   conforms  is  treated  by 

to  what  was  the  actual  intention  in  most  cases  ; 
but  still  those  courts  treat  the  party  not  as  an  indorser  proper, 
but  as  an  indorser  sub  modo.'  Certain  other  courts  meet  the 
difficulties  of  the  anomalous  contract  well,  by  treating  it  as  a 
contract  but  imperfectly  expressed,  or  rather  as  expressed  but 
in  part;  and  accordingly,  the  contract  being  regarded  as  an 
open  one,  they  receive  evidence  to  show  what,  in  point  of  fact, 
was  the  understanding  of  the  parties  in  the  execution  of  the 
particular  engagement.*  But  the  party  is  treated,  prima  facie, 
as  a  maker.^ 

Another  course,  more  commonly  followed  than  either  of  the 
foregoing  ones,  proceeds  to  treat  the  contract  in  the  way  of  an 
arbitrary  presumption;  the  party  being  regarded  as  in  the  situ- 
ation of  a  maker  of  the  note.®     If  he  signed  the  paper  when  it 

^  Doubtless  the  same  might  be  said  of  a  bill  of  exchange,  or  perhaps  of  a 
cheque.  Jenkins  v.  Coomber,  1898,  2  Q.  B.  168,  bill  of  exchange.  But  sui^h 
cases  are  seldom  if  ever  met  with  in  this  country. 

2  Jenkins  v.  Coomber,  supra.  See  also  Steele  t;.  McKinley,  5  App.  Ca.s. 
754.     That  is,  there  is  no  custom  of  the  kind. 

3  Coulter  V.  Richmond,  59  N.  Y.  478  ;  Hall  v.  Newcomb,  7  Hill,  416  ; 
Clouston  V.  Barbiere,  4  Sneed,  336. 

*  Sylvester  v.  Downer,  20  Vt.  355  ;  Cases,  35.  See  Eilbert  v.  Finkbeiuer, 
68  Penn.  St.  243 ;  Carr  v.  Rowland,  14  Texas,  275  ;  Good  v.  Martin,  95  U.  S. 
90  ;  Rey  v.  Simpson,  22  How.  341. 

*  Sylvester  v.  Downer,  supra. 

^  Union  Bank  y.  Willis,  8  Met.  504  ;  Rodocanachi  v.  Buttrick,  125  Mass. 
134  ;  Phillips  v.  Cox,  61  Ind.  345  ;  Herbage  v.  McEntee,  40  Mich.  337 ;  Sera- 


48  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IV. 

was  executed,  he  is  a  co-maker  and  joint  maker  with  the  real 
maker;  if  he  signed  at  some  later  time,  he  is  still  a  maker, 
though  not  a  joint  maker,  —  a  maker  by  way  of  guarantor  or 
surety.-'  In  the  first  of  the  two  cases  his  liability  is  supported 
by  the  same  consideration  which  supports  that  of  the  real 
maker;  in  the  second,  it  must  be  sujjported  by  a  new  considera- 
tion of  its  own.^  Probably  for  some  purposes  the  party  would 
be  treated  as  a  surety  even  in  the  first  case,"  where  he  is  held  to 
be  joint  maker;  for  it  is  to  be  remembered  that  a  surety  may 
be  a  joint  maker  with  his  principal.  The  courts  which  adopt 
this  course  admit  evidence  to  show  the  time  when  the  anomalous 
contract  was  signed,  giving  effect  to  the  undertaking  accord- 
ingly; but  that  is  the  extent  to  which  they  allow  the  contract 
to  be  effected  by  evidence.^ 

All  this,  however,  supposes  that  the  anomalous  signing  was 
for  the  further  security  of  the  payee,  with  liability  to  him.^  If 
that  was  not  the  case,  if  the  signing  was  not  intended  to  make 
the  party  liable  to  the  payee,  but  to  add  security,  with  indorse- 
ment by  the  payee,  to  a  purchaser  of  the  paper,  then  the  signing 
is  not  deemed  anomalous  at  all,  —  it  is  indorsement  proper,  by 
the  better  doctrine,  if  the  payee  also  has  indorsed.* 

pie  V.  Turner,  65  Mo.  696  ;  Bank  of  Jamaica  v.  Jefferson,  92  Tenn.  537  ; 
Ewan  V.  Brooks-Waterfield  Co.,  55  Ohio  St.  596. 

1  Kodocanachi  v.  Buttrick,  supra  ;  Way  v.  Butterworth,  108  Mass.  509 ; 
Greenough  v.  Smead,  3  Ohio  St.  415  ;  Seymour  v.  Mickey,  15  Ohio  St.  515. 

2  Tenney  v.  Prince,  4  Pick.  385  ;  Green  v.  Shepherd,  5  Allen,  589,  591 ; 
Moses  V.  Lawrence  Bank,  149  U.  S.  298  ;  Cases,  221. 

8  Wright  V.  Morse,  9  Gray,  337. 

*  There  is  much  real,  and  still  more  seeming  conflict  of  authority  in  regard 
to  cases  of  anomalous  signature  ;  but  most  of  the  cases,  of  which  there  is  a 
multitude,  will  fall  under  one  of  the  three  classes  of  the  text. 

5  Bigelow  V.  Colton,  13  Gray,  309  ;  Clapp  v.  Rice,  id.  403 ;  Lewis  v.  Mon- 
ahan,  173  Mass.  122;  Bank  v.  Payne,  111  Mo.  291;  Bank  v.  Noidgen,  157 
111.  663.  But  see  Sylvester  v.  Downer,  20  Vt.  355  ;  Cases,  35  ;  Ewan  v. 
Brooks-Waterfield  Co.,  55  Ohio  St.  596  ;  McFetrich  v.  Woodrow,  67  N.  H. 
174.  '  Whether  the  maker  of  the  note  indorsed  it  before  or  after  the  indorse- 
ments of  the  defendant  and  the  plaintiff  were  affixed  was  immaterial,  if  the 
maker  indorsed  the  note  before  it  was  discounted.  .  .  .  The  plaintiff  and  the 
defendant  were  not  makers,  but  were  indorsers  of  a  note  which  was  in  effect  a 
note  payable  to  the  bearer.'     Lewis  v.  Monahan,  supra  ;  in  which  the  plaintiff 


Sect.  6.]  MAKER'S  CONTRACT.  49 

The  Statute  provides  that  a  person  who  places  his  name  upon 
an  instrument  otherwise  than  as  maker,  drawer,  or  acceptor  is 
an  indorser,  unless  he  clearly  indicates  his  intention  .^ 
to  be  bound  in  some  other  capacity.     And,  further.   Statute,  a 
that  a  person  not  otherwise  a  party  to  an  instru- 
ment, by  placing  his  name  thereon  in  blank,  before  delivery, 
is  liable  as  indorser,  in  accordance  with  certain  rules   (which 
will  be  stated  when  indorsement  is  reached).^     It  seems  how- 
ever that  the  non-statutory  law  still  obtains,  in  so  far  as  the 
Statute  has  not  plainly  repealed  it.^ 

and  defendant  weresuccessive  parties  by  indorsement  of  a  note,  before  delivery, 
for  the  maker's  benefit.  The  maker,  who  was  also  payee,  indorsed  above 
their  names,  and  before  delivery. 

1  N.  I.  L.  §§  70,  71. 

2  See  Brooker  v.  Stackpole,  168  Mass.  537,  under  legislation  of  1874,  and 
holding  that,  though  the  anomalous  party  was  by  that  change  in  the  law 
entitled  to  notice  of  dishonor,  he  remained  '  in  all  other  respects  '  a  co-maker. 
See  also  Rodocauachi  v.  Buttrick,  125  Mass.  134. 


50  BILLS,  NOTES,  AND  CHEQUES.  [Chap  V. 


CHAPTER  y. 
ACCEPTOR'S  CONTRACT. 

§  1.  Acceptance  Proper:  Nature  and  Incidents. 

The  drawee,  as  such,  of  a  bill  of  exchange  ^  (or  by  the  better 
rule  of  a  cheque  ^  )  is  under  no  liability  whatever  to  the  hold&r  j 
Drawee  not  to  the  holder  he  has  not  bound  himself  in  contract, 
liable.  ^^^  }jg  cannot  be  liable  to  the  holder  in  tort  'U|)on 

refusal  to  honor  the  paper  because  as  drawee  he  owes  no  duty  to 
him.  Until  acceptance  he  owes  no  duty  to  any  one,  unless  it 
be  to  the  drawer ;  and  to  the  drawer  his  duty  is  one  of  the  com- 
mon law  only.  The  instrument  is  not  an  assignment  of  the 
money  to  the  payee  or  other  holder.' 

Acceptance  proper  is  the  act  by  which  the  drawee  of  a  bill  of 

exchange,  whether  foreign  or  inland,  signifies  his  assent  to  the 

order    of    the    drawer,   that    is,  his   undertaking, 
What  accept-  .  '  '  ,  ^ 

anceis:  its  according  to  the  law  merchant,  to  pay  the  bill.* 
Sometimes  a  cheque  is  said  to  have  been  'ac- 
cepted '  by  some  significant  act  of  the  drawee ;  but  the  'accept- 
ance '  will  be  found  to  be  a  different  thing  in  legal  effect  from 
the   acceptance  of   a   bill  of  exchange.     If   written   upon   the 

1  N.  1.  L.  §  134. 

2  Bank  of  Republic  v.  Millard,  10  Wall.  152;  Fourth  Street  Bank  v. 
Yardley,  165  U.  S.  634 ;  Akin  v.  Jones,  93  Tenn.  353 ;  Cincinnati  R.  Co.  v. 
Bank,  54  Ohio  St.  60  ;  Covert  v.  Rhodes,  48  Ohio  St.  66  ;  House  v.  Kountze, 
17  Texas  Civ.  Ap.  402  ;  N.  I.  L.  §  193.  Contra,  Thomas  v.  Exchange  Bank, 
99  Iowa,  202;  Gage  Hotel  Co.  v.  Union  Bank,  171  111.  531. 

5  N.  I.  L.  §  134.  This  is  true  also,  by  the  better  rule,  in  regard  to  cheques. 
See  note  2  ;  N.  L  L.  §  196. 

*  N.  L  L.  §  139.  In  the  case  of  bills  drawn  in  a  set  the  acceptance  may 
he  written  on  any  part  and  should  be  written  on  but  one  ;  otherwise  the 
acceptor  may  be  liable  more  than  once,  for  the  parts  might  fall  into  the  hands 
of  several  holders  in  due  course.     N.  I.  L.  §  188. 


Sect.  1.]  ACCEPTOR'S  CONTRACT.  51 

cheque,  it  will  be  certification ;  if  not,  it  will  at  most  be  only 
an  external  promise  to  pay  it.  In  neither  case  will  it  be  of 
the  same  effect  as  acceptance  proper  of  a  bill  of  exchange,  i.  e. 
written  acceptance  upon  the  bill. 

No  one  else  than  the  drawee  or  his  agent  (except  perhaps  as 
exirety  or  guarantor  with  the  drawee)  can  assume  the  position 
and  liability  of  acceptor.  For  example :  A  draws  a  bill  on  B, 
payable  to  the  order  of  C.  B  writes  his  name  across  the  face 
of  the  bill,  or  elsewhere  upon  it.  B  is  an  acceptor,  bound 
absolutely  to  pay  the  bill.  Again :  A  draws  a  bill  on  B,  pay- 
able to  the  order  of  C.  D  writes  the  word  '  Accepted  '  across 
the  face  of  the  bill,  and  signs  his  name  thereto.  D  is  not  an 
acceptor  of  the  bill.^ 

By  absolute  acceptance,   the  drawee   contracts   much  as  the 

3ts:  he  binds  himself  to  the 
to  the  tenor  of  the  bill. 
But  the  acceptor  may  annex  a  condition  to  his  acceptance, 
when  of  course  he  will  be  bound  according  to  the  tenor  of  his 
acceptance.' 

Acceptance  proper  binds  the  acceptor  by  the  custom  with- 
out regard  to  the  question  whether  the  bill  was  taken  by 
the  holder  on  the  faith  of  the  acceptance.  The  act  is  effectual 
though  not  done  until  after  the  holder  became  owner  of  the  bill, 
and  though  he  took  it  without  any  intimation  on  the  part  of  the 
drawee  of  intention  to  accept  it.  Enough  that  the  holder  is  a 
holder  in  due  course,  though  there  was  no  consideration  between 
him  and  the  acceptor,  and  though  there  was  no  consideration 
between  the  acceptor  and  the  drawer,  for  the  acceptance.  For 
example  :  The  plaintiff  was  payee  of  a  foreign  bill  of  exchange, 
which  he  took  from  the  drawer  on  the  day  of  its  date,  for  value, 

1  Davis  V.  Clarke,  6  Q.  B.  16  ;  Cases,  45  ;  May  i'.  Kelly,  27  Ala.  497. 
There  could  be  no  protest  and  notice,  such  as  would  bind  the  drawer  or 
indorsers  on  D's  refusal  to  pay,  for  the  drawer  never  requested  him  to  pay. 

If  no  drawee  is  named  in  a  draft,  the  instrument  may  be  treated  either  as  a 
note  (or  it  is  said)  as  a  bill.  If  it  is  treated  as  a  bill,  the  drawer  may  be 
deemed  drawee  and  acceptor.  Funk  v.  Babbitt,  156  111.  408.  Compare  N. 
I.   L.  §  24,  5,  of  ambiguous  instruments. 

2  N.  I.  L.  §  69 ;  Herter  v.  Goss  &  Edsall  Co.,  57  N.  J.  42. 


52  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  V, 

in  regular  course  of  business,  before  acceptance.  The  defendant 
accepted  the  bill  without  consideration  from  the  drawer.  The 
plair+^ff  is  entitled  to  recover.^ 

Besides  undertaking  to  pay,  the  acceptor  '  admits, '  as  a  legal 
incident  to  his  contract,  the  existence  of  the  drawer,  the 
Incidents  of  genuineness  of  the  drawer's  signature,  and  his 
acceptance.  capacity  and  authority  to  draw  the  bill,  and  also 
the  existence  of  the  payee  and  his  capacity  at  the  time  to 
indorse.^  It  will  be  necessary  to  consider  this  subject  more 
fully  in  another  chapter.^ 

Acceptance  once  given  is  irrevocable  and  conclusive^  in  _the 
absence  of  fraud.  It  cannot  be  withdrawn  on  the  ground  of 
Cannot  be  mistake;  for  instance  on  the  drawee's  discovering 

revoked.  ^j^^^  \^q  ^^s  not  indebted  to   the  drawer.*     Even 

in  case  offraud  (unless  '  in  esse  contractus ')  ^  it  could  not^be 
withdrawn  against  a  holder^jn  due  cours^e.  And  like  the  maker 
of  a  promissory  note,  the  acceptor  of  a  bill  of  exchange  is 
bound  to  pay  without  any  demand;  unless  his  acceptance  is 
so  qualified  in  terms  as  to  require  demand  as  a  condition  to  his 
liability.® 

1  Foot  V.  Carter,  152  Mass.  34;  Arpin  v.  Owens,  140  Mass.  144  ;  Ameri- 
can Bank  v.  Gluck,  68  Minn.  129  ;  Heurtematte  v.  Morris,  101  N.  Y.  63  ; 
Webster  v.  Howe,  54  Conn.  394.  '  It  is  immaterial  when  an  acceptance  is 
made  ;  it  may  be  made  at  any  time,  and  the  rights  of  the  payee  and  of  indorsees 
are  the  same  after  it  is  made  whether  they  were  acquired  in  anticipation  of 
it  or  subsequent  to  it.'     Arpin  t;.  Owens,  supra. 

2  N.  I.  L.  §  69. 

*  Chapter  XVI,  on  Absolute  Defences, 

*  Grumback  v.  Hirsch,  17  Texas  Civ.  Ap.  618;  Tile  Co.  v.  Bank,  23  Atl, 
Rep.  423;  Hoffman  i-.  Bank,  79  U.  S.  181.  The  rule  appears  to  be  otherwise 
in  regard  to  the  certification  of  a  cheque.  Irving  Bank  v.  Wetherald,  36 
N.  Y.  335.  So  held  too  of  payment  of  cheques  under  mistake  in  regard  to 
funds.  Merchants'  Bank  v.  Eagle  Bank,  101  Mass.  281,  285.  Sed  qu. 
Compare  London  Bank  v.  Bank  of  Liverpool,  1896,  1  Q.  B.  7. 

'  See  p.  205. 

*  Steiner  v.  Jeffries,  118  Ala.  573.  Presentment  for  acceptance  pertains 
only  to  the  contract  of  the  drawer  or  indorsers,  and  hence  will  be  considered 
in  another  place. 


Sect.  1.]  ACCEPTOR'S  CONTRACT.  5^ 

Acceptance  proper  is  signified  by  writing,  upon  the  bill  of 
exchange;  in  no  other  way  can  the  order  be  fully  satisfied,  with- 
out the  consent  of  the  holder.  In  other  words  the  How  signified: 
order  gives  the  holder,  by  the  law  merchant,  requirfdTYra'!'' 
the  right  to  insist  upon  written  acceptance  upon  acceptance. 
the  bill.^  The  Statute,  which  so  declares,  is  only  an  aftirmation 
of  the  law  as  it  stood  before.  The  result  is,  that  the  holder 
may  treat  the  bill  as  dishonored  if  such  acceptance  is  refused,* 
though  acceptance  in  some  other  way  is  offered. 

Indeed  no  other  kind  of  acceptance  received  by  the  holder  of 
a  negotiable  bill  would  bar  the  right  of  later  holders  to  require  ac- 
ceptance proper.  Subsequent  holders  would  have  the  same  right 
to  insist  upon  acceptance  on  the  bill  that  the  first  holder  had, 
unless  limited  by  contract  or  assent  in  some  other  way.  It  has 
sometimes  been  laid  down  that  acceptance  may  be  oral  as  well 
as  written ;  but  that  does  not  mean  that  oral  acceptance  has  the 
same  effect  as  acceptance  written  on  the  bill.  Thus  an  oral  ac- 
ceptance of  a  bill  of  exchange  may  indeed  be  binding  in  favor 
of  an  indorsee  of  the  person  to  whom  it  was  given ;  ^  but  where 
that  is  true,  it  is  because  of  the  indorsee's  right  to  elect  to  treat 
the  oral  promise  as  sufficient,  and  not  because  he  was  bound  as 
indorsee  to  receive  the  oral  acceptance  in  lieu  of  acceptance  on 
the  bill. 

Acceptance  on  the  bill  may  be  signified  before  the  drawer  has 
signed  the  instrument,  or  while  it  is  otherwise  incomplete;  also 
when  the  bill  is  overdue  or  even  after  it  has  been  Acceptance 
dishonored  by  a  refusal  to  accept  or  by  non-pay-  coinpleted  :'^ 
ment.     If  however  a  bill  payable  after  sight  should  overdue  bill, 
be  dishonored  by  non-acceptance  and  afterwards  accepted,  the 
holder,  unless  there  should  be  some  other  understanding,  would 

1  N.  I.  L.  §  140.  2  i(j. 

8  Putnam  Bank  v.  Snow,  172  Mass.  569:  'It  is  clear  that,  in  the  absfinfia 
of  any  statute  to  the  contrary,  an  oral  acceptance  of  an  existing  bill  of  ex- 
change  is  valid  in  this  counti^  and  that  an  indorsee  of  a  bill  so  accepted  may 
maintain  an  action  on  such  acceptance  against  the  acceptor.'  Morton,  J.,  cit- 
ing several  Massachusetts  cases,  and  also  Coolidge  v.  Payson,  2  Wheat.  66  ; 
Townsley  v.  Sumrall,  2  Peters,  170  ;  Spaulding  v.  Andrews,  48  Penn.  St.  411; 
Bissell  V.  Lewis,  4  Mich.  450  ;  Nelson  v.  First  National  Bank,  48  111.  36. 


^<rt^ 


54  BILLS,  NOTES,  AND  CHEQUES.  CChap.  V. 

be  entitled  to  have  the  acceptance  relate  to  the  time  of  the  first 
presentment  to  the  drawee.^ 

The  drawee  has,  under  the  Statute,  twenty-four  hours'  time 
after  presentment  for  deciding  whether  he  will  accept;  the 
„.  acceptance  however  dating  back,   if  given,  to   the 

cision  as  to        day  of  the  presentment.'^     All  this  probably  applies 
to  a  second  presentment,  that  is,  after  a  refusal,  as 
well  as  to  the  first. 

If  the  drawee's  agent  accepts  for  the  drawee,  his  acceptance 
should  show  that  it  is  on  behalf  of  the  drawee  and  should  pur- 
Acceptance  P°^^  ^^  terms  to  bind  him.  External  evidence 
by  agent.  would    not    be    received    to   disclose    the    agency. 

For   example:    'Office   of   Portage    Lake    Manufacturing   Co., 
Hancock,   Mich.,   June  5th,   1861. 

'E.  T.  Loring,  Agent,  39  State  St.,  Boston. 
At  four  months'  sight  pay  to  the  order  of  J.  H.  Slawson,  four 
hundred  dollars,  and  charge  the  same  to  this  company. 

[Signed]  'I.  R.  Jackson,  Agt.,' 
and  accepted  across  the  face,  *  E.  T.  Loring,  Agent,'  binds  Lor- 
ing personally,  and  evidence  of  his  agency  will  not  be  received.' 

Apart  from  statute  written  acceptance  may  be  made  in  any 

way  and  anywhere,  if  upon  the  bill  or  upon  a  paper  annexed,  so^ 

long  as  there  is  an  intention  to  accenL.  There  are 
How  accept-        ,      "^  .  .    ,  , 

ance  is  signi-      in  use,  however,  certain  brief  modes  of  acceptance 

by  which,  because  they  conform  to  recognized  cus- 
tom, the  law  understands  the  intention  directly,  as  much  so  as  if 
the  drawee  were  to  write  out  in  full  and  sign  his  undertaking 
to  pay  the  bill  at  maturity.  In  these  cases  the  intention  to  ac- 
cept is  fixed  by  the  particular  act;  no  different  intention  can  be 
shown,  unless,  indeed,  by  fraud  and  mistake,  or  perhaps  by  mis- 

1  N.  I.  L.  §  145.  2  irl.  §  143. 

'  Slawson  v.  Loring,  5  Allen,  340.  '  Being  negotiable  paper,  all  evidence 
dehors  the  draft  is  to  be  excluded.  It  is  wholly  immaterial  therefore  that  the 
defendant  was  in  fact  the  agent  of  the  company  named  on  the  face  of  the  draft, 
that  the  plaintiff  knew  that  he  was  so,  and  that  the  defendant  had  no  per- 
fional  interest  in  the  company.* 


Sect.  2.]  ACCEPTOR'S   CONTRACT  55 

take  without  fraud,  the  alleged  acceptor  was  led  to  signing  one 
instrument  when  he  supposed  he  was  signing  another,^  The 
customary  modes  of  acceptance  thus  recognized  by  law  are  the 
following:  Writing  the  word  'accepted,'  or  writing  the  name  of 
the  drawee,  or  any  substitute  for  his  name,  upon  the  face  of  the 
bill;  either  of  these  alone,  written  by  the  drawee  or  by  hi« 
agent,  has  a  fixed  meaning  in  law,  to  wit,  acceptance.'^ 

There  are  other  modes  of  writing  on  the  bill,  by  the  drawee, 
which,  though  they  have  not  the  force  of  recognized  custom,  but 
still  apparently  signify  acceptance,  are  deemed  presumptively  to 
be  a  manifestation  of  intention  to  accept  ;  that  is,  they  are 
deemed  prima  facie  acceptance.  The  commonest  of  these  are 
the  following:  Writing  upon  the  bill  'presented,'  or  'seen,'  or 
the  day  of  the  month ;  these  or  any  other  words  written  by  the 
drawee,  which  are  consistent  with  the  idea  of  acceptance,  are 
held  to  amount  to  acceptance  unless  they  are  shown  to  have 
been  written  with  a  different  intention.^ 

The  Statute  however,  like  previous  legislation  in  some  of  the 
States,  requires  the  signature  of  the  drawee.* 

§  2.     Kinds  of  Acceptance  (proper). 

Acceptance  on  the  bill  may  be  general  or  qualified.     General 

acceptance  is  an  assent  to  the  order  without  qualification;^  as 

for  instance  by  the  mere  signature  of  the  drawee,   „ 

.  .  '   General  accept- 

or adding   to  the   signature   a  particular   place  of  ance :  qualified 

payment,   if  such  place  be  not  designated   as  the  **^*^®P^""*^^- 
only   place    of   payment.*      A   qualified   acceptance   varies,    in 

1  Compare  Foster  v.  Mackinnon,  L.  R.  4  C.  P.  704;  iudorsement  procured 
ty  fraud  as  to  the  instrument.  Such  cases  must  be  distinguished  from  fraudu- 
lent representations  in  regard  to  the  consideration. 

2  See  Spear  v.  Pratt,  2  Hill,  582. 

8  See  Spear  v.  Pratt,  supra.  It  has  been  held  that  a  signature  of  the 
drawee  following  the  words,  '  Paid  on  this  order  forty  dollars, '  amounts  to  an 
acceptance  of  the  whole.  Peterson  v.  Hubbard,  28  Mich.  197.  But  see  Cook 
V.  Baldwin,  120  Mass.  317;  Bassett  v.  Haines,  9  Cal.  261. 

*  N.  I.  L.  §  139  :  'The  acceptance  must  be  in  writing  and  signed  by  the 
drawee.'  The  drawee's  signature  alone  would  satisfy  the  Statute.  Spear  w. 
Pratt,  supra. 

«  N.  I.  L.  §  146.  6  Id.  §  147. 


56  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  V. 

terms,  the  effect  of  the  order;  as  for  instance  by  designating  a 
particular  place  of  payment  as  the  only  place  of  payment,^  or 
by  making  payment  otherwise  conditional,^  or  by  restricting 
the  sum  payable,'  or  the  time  of  payment,*  or  by  being  the 
act  of  but  one  or  more  of  the  drawees  when  there  are  two  or 
more  drawees.^  The  Statute  mentions  no  other  instance  of 
qualified  acceptance  ;  whether  the  enumeration  is  intended  to 
be  complete,  so  as  to  exclude  all  else,  may  however  be  doubted. 
If  the  holder  may  elect  to  receive  any  of  the  designated  kinds 
of  qualified  acceptance,  it  is  not  unreasonable  to  suppose  that 
he  may  receive  others. 

It  should  be  noticed,  as  has  been  intimated  already,  that  the 

holder  is  not  bound  to  receive  a  qualified  acceptance;  he  may 

^    insist  upon  acceptance  according  to  the  order,  that 
General  accept-    .  . 

ance  may  be  is,  general  acceptance,  and  if  the  drawee  refuses 
require  .  treat  the  bill  as  dishonored.®     It  should  also  be 

noticed  that  as  a  qualified  acceptance  is  not  a  complianoe  with 
the_sid^r,  the  drawer  and  any  indors^rs-af-^heJiLU  at  the  time, 
not  havijig_j,£&eiitfid,  are  no  parties  to_thfi-qualified  undertak« 
XSig.',  and  the  order  itriolf  having  failed,  they  are  discharged.'^ 
Still  if  they  authorized  the  qualified  acceptance,  or  if  they  after- 
wards assented  to  it,  they  will  be  bound  accordingly,  that  is, 
according  to  the  qualified  acceptance.^ 

The  drawer  and  indorsers  are  deemed  to  assent  to  a  qualified 

acceptance,  if^  having  received^notice  from  the  holdeLihaJLSuch 

.       f   f   ti      an_acceptaii^eJhas_jD£fia--r£C£ii£^,  they  do  not_a2:- 

parties  to  quali-  press  their  dissent  withjn  a,  reasonable  time.^     All 

fied  acceptance.    -"     T"-  i~  .    .       .,  TTT    ^; 7  ' 

parties  subsequent  to  the  qualified  acceptance  as- 

sent^  of_course,  to  it.     The  qualitips  nf  tbp  instrnment  are  npt 

affected  by  the  qualified  acceptance  otherwise  than_as_Jiatii-baea 

indicated ;   and  what  has  heMt   sn.irl    applies  both   tn_J:l)ft^_iin. 

written  law  m^idiaLut  and  to  the^tatute. 

1  N.  I.  L.  §§  U7,  148,  3.  2  Id.  §  148,  1.  3  Id.  2. 

*  Id.  4.  6  Id.  5.  6  Id.  §  149. 


(MP 


8    Id.  9   Id. 


't,^    ^<.s^   Q-f^^ 


fidh- 


Sect.  3.]  ACCEPTOR'S  CONTRACT.  57 

§    3.      QUASI-ACCEPTANCE. 

Besides  acceptance  proper,  as  above  described,  various  acts 
are  called  acceptance  with  some  qualifying  word ;  none  of  them 
having  the  effect  of  acceptance  proper.  Such  acts  Enumeratioa 
may  be  called  quasi-acceptance.  The  following  is  of  cases, 
an  enumeration  of  the  same  (ijVVritten  acceptance  on  a  separate 
paper  not  attachedj^ral  acceptance(j|!lacceptance  by  conduc(^|pic- 
ceptance  for  honorji^romise  to  accept  or  '  virtual  acceptance  ' 
so-called.     These  in  order. 

First  then  of  written  acceptance  not  on  or  attached   to  the  //  J 
bill.     By  this  is  meant   what,   if  written  on  the   bill,    would 
be  either  an  absolute  or  a  qualified  acceptance,  ac-  Written  ac- 
cording to  its  terms;  that  is  to  say,  it  is  either  an  separate instru- 
absolute  or  a  qualified    promise   to   pay  the    sum  ment. 
named  in  the  bill,  as  distinguished  from  a  promise  to  accept 
the  same  at  some  future  time.     The  bill  should  be  identified  /  ^v^ 
either  in  the  acceptance  or  in  the  correspondence  or  negotia-  /  s  ^^r 
tions  relating  to  it,  or  at  least  be  capable  of  identification  by/  y/ 
external  evidence. 

That  such  an  acceptance  differs   essentially   in  legal    effecif 

from   acceptance    is   clear.     The    Statute,    following   no   douBt 

unwritten  law  merchant  so  far  as  there  is  any  on  the  subjegt, 

declares  that  acceptance  written  elsewhere  than  upon  the  bill 

itself  binds  the  acceptor  only  in  favor  of  a  person  to  whom  the 

acceptance  is  shown,  and  then  only  in  case  he  takes  the  bill  for 

value  on  the  faith  of  the  acceptance.^     The  act  no  doubt  admits, 

as  an  incident,  the  authority  and  capacity  of  the  drawer  to  draw 

the  bill,  in  the  absence  of  fraud,  and  also  the  genuineness  of  the 

drawer's  signature  when  the  acceptance  is  given  after  seeing 

the  bill.     Perhaps  the  acceptance  also  admits  the  cajiacity  of 

the  payee  to  indorse.     The  Statute  is  silent  on  these  points. 

Probably  acceptance  by  telegraph  would  be*'^ac- 

.  ,  .       ,  •  T  ^      -,        o  •^        Telegraph, 

ceptance  within  the  meaning  of  the  law.'' 

Q^N.  I.  L.  §  141.  Qu.  whether  there  must  also  be  a  promise  to  such  taker 
of  tlie  bill,  where  he  is  not  the  person  to  whom  the  acceptance  is  first  given  ? 
Perhaps  not. 

*  See  Henrietta  Bank  v.  State  Bank,  80  Texas,  648  ;  Cases,  56  ;  North 


l^) 


^fiwX 


58  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  V. 

Secondly,  of  oral  acceptance.  Some  remarks  have  already 
been  made  on  this  kind  of  acceptance,  in  speaking  of  acceptance 
Oral  accept-  proper;  the  effect  of  which  was,  that  oral  accept- 
ance, ance  does  not  comply  with  the  order  except  at  the 
election  of  the  holder.  Any  holder  may,  it  seems,  elect  to 
have  the  benefit  of  it,  even  though  not  the  one  to  whom  the 
acceptance  was  immediately  given. ^ 

Much  of  what  has  been  said  concerning  acceptance  on  a  sepa- 
rate sheet  applies  to  oral  acceptance.  The  acceptance  may  be 
absolute  or  qualified;  the  bill  should  be  identified  by  the 
acceptance  or  capable  of  identification;  and  the  incidents  of 
the  contract  are  probably  the  same  as  in  the  acceptance  hist 
mentioned.  "y 

Oral  acceptance  then  is  not  necessarily  open  to  the  objection 
that  it  is  obnoxious  to  the  provision  of  the  Statute  of  Frauds 
Statute  of  which  requires  promises  to  answer  for  the  debt  or 

Jrandsasto       default  of  another  person  to   be   in  writing.     In 

oral  accept-  ^  _  _  ° 

ance.  accepting  the  acceptor  ordinarily  promises  to  pay 

a  debt  of  his  own,  due  the  drawer  of  the  bill,  to  another  per- 
son, the  payee  or  other  holder  of  the  bill.  The  Statute  of 
Frauds  does  not  affect  an  oral  consent  by  the  debtor  to  a  re- 
quest of  the  creditor  to  pay  the  debt  to  another.  But  it  may 
be  that  the  oral  acceptor  did  not  owe  the  drawer  any  debt, 
and  was  under  no  duty  at  all  to  him  to  accept  the  bill;  if  then 
the  drawer  owed  the  payee  or  other  holder  a  debt  or  duty  to  be 
discharged  by  the  bill,  the  oral  acceptance  might  be  within  the 
Statute  of  Frauds.^ 

According  to  older  authority,  still  maintained  to  a  consider- 
able extent,  the  oral  undertaking  in  the  case  just  put  would  not 
be  within  the  Statute  of  Frauds  if  credit  was  given  to  the  oral 

Atchison  Bank  v.  Garretson,  51  Fed.  Rep.  167,  '  acceptance '  of  a  cheque  by- 
telegraph. 

1  Putnam  Bank  v.  Snow,  172  Mass.  569,  575-576  ;  ante,  p.  53.  This  case 
was  a  suit  upon  a  promise  to  accept,  not  upon  a  direct  oral  acceptance ;  but 
the  language  is  fortified  by  many  cases  cited. 

2  See  Walton  v.  Mandeville,  41  Am.  Rep.  123  ;  Manley  v.  Geagan,  105 
Mass.  445  ;  Pierce  v.  Kittredge,  115  Mass.  374.  If  the  drawer  did  not  owe 
the  payee  or  holder,  and  the  accejitor  did  not  owe  the  drawer,  the  whole 
transaction,  so  far,  would  fall  to  the  ground  for  want  of  consideration. 


Sect.  3.]  ACCEPTOR'S  CONTRACT.  59 

acceptor,  by  the  payee  or  holder,  at  the  time  and  as  part  of  the 
transaction  connected  with  the  acceptance.  According  to  that 
view,  the  acceptor  incurs  a  debt  of  his  own  in  the  credit  given 
by  the  payee  or  holder ;  and  the  acceptance  therefore  is  only  the 
acceptor's  promise  to  pay  his  own  debt.  That  view  however 
has  well  been  considered  unsatisfactor3\ 

The  credit  so  given  is  not  a  'debt  or  default'  in  the  natural 
sense ;  and  as  there  is  nothing  in  the  language  of  the  Statute 
of  Frauds  to  indicate  that  those  words  are  not  to  be  taken  in 
their  natural  or  primary  sense,  they  should  be  taken  in  that 
sense.  A  '  debt '  due  by  A  to  B  imports,  in  the  natural  sense 
of  the  word,  some  benefit  which  A  has  obtained  from  B,  and 

*  default '  of  A  towards  B  some  harm  which  A  has  caused  to  B. 

*  Credit '  given  by  B  to  A,  in  respect  of  a  transaction  in 
which  A  has  no  interest  or  concern,  except  as  his  promise  to 
pay  creates  it,  does  not  fit  the  case.  The  authorities  too  appear 
to  be  inconsistent  with  themselves.  For  it  seems  to  be  agreed 
that  if  the  oral  promise  was  sicbsequent  to  the  transaction  in 
which  the  drawer  became  indebted  or  bound  to  the  payee  or 
holder,  the  true  question  is.  Did  the  oral  acceptor  make  his 
promise  by  reason  of  value  received  by  him?  That  is,  did  any 
consideration  move  from  the  payee  to  the  acceptor,  to  the  tatter's 
benefit  ?  If  the  answer  is  in  the  negative,  the  acceptance  is 
within  the  Statute  of  Frauds,  and  is  not  binding.^  Now  if  the 
test  in  this  latter  case  is  one  of  benefit  to  the  acceptor,  accord- 
ing to  the  natural  meaning  of  the  language  of  the  Statute,  it  is 
hard  to  see  why  the  same  is  not  true  where  the  transaction  be- 
tween the  drawer  and  the  payee  or  holder  was  contemporaneous 
with  the  acceptance,  the  acceptance  being  the  inducement  to 
the  transaction.^  The  language  of  the  Statute  is  general,  and 
should  be  taken  in  the  same  sense  in  all  cases.  The  first  of  the 
views  above  mentioned  confounds  consideration  with  debt;  the 
giving  of  credit  makes  consideration  but  not  debt.* 

1  See  Nelson  v.  Boynton,  3  Met.  396  ;  Curtis  v.  Brown,  5  Cusli.  488. 

2  See  Sutton  v.  Grey,  1894,  1  Q.  B.  285;  Manley  v.  Geagan,  105  Mass 
445.  And  upon  the  whole  subject  see  the  very  clear  exposition  of  it  in  Harri- 
man.  Contracts,  196-199. 

*  It  should  be  particularly  noticed  that  the  Statute  of  Frauds  is  not  satia* 


C2) 


60  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  V. 

Thirdly,  of  acceptance  by  conduct.  This  too,  it  should  first 
be  noticed,  is  in  effect  oral  acceptance,  and  therefore  is  or  is  not 
Acceptance  by  obnoxious  to  the  Statute  of  Frauds  in  accordance 
conduct:  'giv-  ^j^h  what  has  been  said.     But  there  are  special 

ing  credit  to  '^     ^ 

bill.'  features  of  acceptance  by  conduct,  which  justify 

giving  it  a  separate  designation. 

Such  acceptance  might  no  doubt  be  given  in  different  ways; 
but  there  aj)pear  to  be  but  two  or  three  recognized  examples. 
One  of  them  is  by  '  giving  credit  to  the  bill.'  As  we  have 
already  seen,  the  drawee  has  twenty-four  hours  for  deciding 
whether  he  will  accept  or  not;  if  he  should  retain  the  bill 
longer,  he  will  be  deemed  to  have  accepted  it,  unless  he  was 
under  no  duty  to  return  it  or  give  answer  to  the  order.  Keeping 
it,  when  the  drawee  is  under  no  duty  to  return  it,  does  not  give 
'  credit '  to  the  bill,  that  is  to  say,  it  does  not  plainly  lead  the 
owner  of  it  to  suppose  that  it  has  been  accepted.^  But  pre- 
sumptively, it  seems,  for  the  drawee  to  retain  the  bill  for  more 
than  twenty-four  hours,  knowing  that  it  has  been  presented  to 
him  for  acceptance,  will  amount  to  acceptance  by  conduct."^  The 
presumption  could  be  overturned  however  not  only  by  showing 
that  the  drawee  was  under  no  duty  to  return  it,  but  that  it  was 
impracticable  to  return  it  within  the  time;  in  which  latter  case 
there  would  be  no  acceptance  unless  the  bill  was  retained  after 
it  became  practicable  to  return  it. 

Another  example,  and  the  only  other  one  given  in  the  Stat- 
ute, is  the  destruction  of  the  bill  by  the  drawee.^  This  too, 
no  doubt,  would  be  no  more  than  presumptive  acceptance,  and 
capable  of  explanation  in  another  sense.  Thus  the  drawee 
might  show  that  the  act  was  one  of  mistake  without  fault  on 

fied  with  the  existence  of  a  consideration  to  support  the  defendant's  promise  ; 
there  must  also  be  a  written  promise. 

1  Dunavan  v.  Flynn,  118  Mass.  537. 

2  N.  1.  L.  §  144.  The  Statute  uses  the  word  'refuses'  by  the  drawee 
within  the  time  ;  but  it  seems  that  he  '  refuses,'  if  he  does  not  comply.  No- 
tice of  dishonor  could  doubtless  be  given  ^ot  failure  to  accept. 

3  Id.  '  Where  a  drawee  to  whom  a  bill  is  delivered  for  acceptance  destroys 
the  same,  or  refuses  within  twenty-four  hours  after  such  delivery,  or  within 
such  other  period  as  the  holder  may  allow,  to  return  the  bill  accepted  or  non- 
accepted  to  the  holder,  he  will  be  deemed  to  have  accepted  the  same.' 


Sect.  3]  ACCEPTOR'S  CONTRACT  61 

his  part,  or  that  it  was  doue  at  the  request  of  the  owner  or  of: 
his  agent. 

This  kind  of  acceptance  operates  only  between  the  immediate 
parties,  unless  the  bill  has  actually  come  again  into  the  posses-, 
sion  of  the  owner.  Obviously  if  it  remains  in  the  hands  of  the 
drawee,^  or  if  it  has  been  destroyed  by  him  and  no  copy  of  it 
made,  no  right  of  action  upon  it  could  be  acquired  by  an  in- 
dorsee. There  could  not  be  an  indorsee  of  an  instrument  not 
delivered  to  him. 

The  contract  will  ordinarily  be  absolute,  and  -^^^^^^  ^^^  j^. 
the  incidents  the  same,  it  seems,  with  those  of  the  cidents  of  con- 
acceptances  already  described. 

Fourthly,  of  acceptance  for  honor.     Such  acceptance  is  also     //J^ 
called  acceptance  supra  protest,  as  it  always  follows  protest,  if    Iv^ 
received  at  all.     It  is  not  in  use  in  this  country,  to  Acceptance  for 
the  extent  of  custom;  but  the  Statute  provides  for  Potior. 
it  as  if  it  were,  adopting  the  law  of  England,  where  the  law  is 
only  an  expression  of  actual  custom.^    It  may  be  received  either 
after,  protest  for  non-acceptance  or  '  for  better  security ' ;    but 
the  holder  is  not  bound  to  receive  it  in  either  form.'     Receiving 
it  has  no  effect  upon  the  liability  of  the  other  parties  to  the  bill. 

Acceptance  for  honor  must  be  in  writing,  must  indicate  that 
it  is  for  honor,  and  must  be  signed  by  the  person  so  accepting.* 
It  may  be  for  the  honor  of  any  or  of  all  the  parties  por  whom:  by 
to  the  bill,  and  may  state  for  whose  honor  it  is  "^bom. 
given;  if  it  should  not,  it  will  be  deemed  to  be  for  the  honor  of 
the  drawer.*  The  acceptance  may  be  for  but  part  of  the  sum 
named  in  the  bill,  and  one  person  may  accept  for  the  honor  of 
one  person  and  another  for  that  of  another.®  According  to  Ihe 
Statute,  any  person  not  a  party  liable  on  the  bill  may,  with  the 
holder's  consent,  intervene  and  accept  supra  protest.'     This,  in 

1  As  in  Dunavan  v.  Flynn,  118  Mass.  537. 

3  N.  I.  L.  Art.  xiv. 

8  That  protest  for  better  security  is  not  necessary,  see  In  re  English  Bank, 
1893,  2  Ch.  438.  Such  protest,  not  being  for  dishonor,  cannot  be  followed  by 
notice  with  any  legal  effect 

*  N.  I.  L.  §  169.  *  Id.  §  170. 

«  Id.  ■'  Id.  §  168. 


62  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  V. 

terms,  would  permit  such  acceptance  by  the  drawee  himself  after 
refusing  acceptance  according  to  the  order.  But  according  to 
the  unwritten  law  merchant  of  this  country,  the  drawee  cannot 
80  accept  if  he  was  under  legal  duty  to  the  drawer  to  honor  the 
bill  by  acceptance.^ 

Acceptance  for  honor  on  non-acceptance  explains  itself,  after 
what  has  been  said.  It  sometimes  happens  that  the  bill  contains 
'  In  case  of  ^  reference  by  the  drawer  to  a  person  named,  to 
need.'  whom  the  holder  is  requested  to  present  the  bill  for 

acceptance  'in  case  of  need,'  that  is,  upon  the  drawee's  refusal 
to  accept.  But  the  request  does  not  bind  the  liolder  ;  ^  he  may, 
if  he  will,  after  causing  tlie  bill  to  be  protested  for  non-accept- 
ance, proceed  as  if  no  such  reference  were  given  and  give  notice 
of  dishonor  to  the  drawer  and  indorsers.  The  person  to  whom 
the  bill  thus  refers  the  holder  is  called  the  '  referee  in  case  of 
need.'  ^ 

Acceptance  for  honor  in  the  way  of  '  better  security  '  follows, 
if  received,  an  actual  acceptance.  Where,  after  acceptance,  the 
For  better  acceptor  has  been  adjudged  a  bankrupt  or  an  insol- 

secunty.  vent,  or  has  made  an  assignment  for  the  benefit  of 

his  creditors,  before  the  maturity  of  the  bill,  the  holder  may 
cause  the  bill  to  be  protested  for  better  securit}'^  against  the 
drawer  and  indorsers,^  and  may  then,  it  seems,  receive  an 
acceptance  for  honor  as  in  other  cases. 

The  contract  of  the  acceptor  for  honor  is  an  undertaking  to 
pay  on  two  conditions  ;  the  first  of  which  is,  that  a  further  pre- 
Nature  of  the  sentment  of  the  bill  to  the  drawee  for  payment  shall 
contract.  -{jg  made  at  maturity,  and  that  if  then  dishonored  it 

shall  be  protested  again  and  due  notice  of  the  dishonor  given  to 
such  acceptor.  For  example  (hypothetical) :  A  draws  a  bill  on 
B,  payable  to  the  order  of  C.  C  presents  the  bill  to  B  for  ac- 
ceptance, and  B  refuses,  whereupon  C  has  it  protested  for  tion- 

1  Schilnmielpennicli  v.  Bayard,  1  Peters,  264  ;  Konig  v.  Bayard,  id.  250. 

2  N.  1.  L.  §  138. 

3  Id.  The  reference  may  relate  to  iion-payment  as  well  as  to  non-accept- 
ance. Id.  Payment  by  such  party  in  such  case  would  be  payment  for  honor. 
See  id.  Art.  xv. 

*  Id.  §  165. 


Skct.  3.]  ACCEPTOR'S  CONTRACT.  65 

acceptance.  D  then  accepts  the  bill,  with  C's  consent,  for  the 
honor  of  A.  At  maturity  C  presents  the  bill  to  B  for  paj^ment, 
who  again  dishonors  it.  C  takes  no  further  step,  or  if  he  causes 
the  bill  to  be  protested,  he  does  not  notify  D  of  the  dishonor. 
D  is  not  liable. 

The  second  condition  is,  that  presentment  for  payment  (after 
performance  of  the  first  condition)  if  to  be  made  to  the  acceptor 
for  honor  in  the  place  where  the  protest  for  non-payment  wadi 
made,  must  not  be  later  than  the  day  following  the  maturity  of 
the  bill.^  If  to  be  made  in  some  other  place,  the  bill  must  be 
sent  forward  within  the  time  prescribed  for  giving  notice  of  dis- 
honor to  an  indorser  residing. in  a  different  place  from  that  of 
the  person  giving  the  notice.^  And  there  is  a  corresponding 
provision  for  cases  of  excusable  delay. ^ 

The  acceptor  for  honor,  upon  payment  of  the  bill   and  ex- 
penses, according  to  the  law,  becomes,  it  may  properly  be  added, 
a  purchaser  and  entitled  to  possession  of  the  bill  Effect  of  pay- 
and  the  protest;  *  succeeding  by  subrogation  to  the  "'^"^  ^3' 
rights  and  the  duties  of  the  last  holder  as  regards  honor, 
the  party  (or  parties)  for  whose  honor  he  pays  and  all  parties  lia- 
ble to  the  latter.     All  parties  subsequent  to  the  party  for  whose 
honor  the  payment  is  made  are  discharged  by  such  payment.^ 

Fifthly,  of  promise  to  accept,  or  '  virtual '  acceptance.     By  this 
is  meant  an  undertaking  by  the  drawee  of  a  bill  of  exchange  t<» 
do  at  some  future  time  what  a  bill  requires  of  the  Promise  to 
drawee  on  presentment  of  the  same  for  acceptance.   tuaP  a«;ept^-"^' 
The  promise  may  be  made  before  the  bill  is  drawn, ^  a»ce. 
or  afterwards.''      It  will  ordinarily  be  a  promise  to  accept  the 

1  This  fact  shows  that  such  second  presentment  for  payment  is  made  to  fix 
the  liability  of  the  acceptor  for  honor,  since  if  made  on  the  day  after  maturity 
it  would  be  of  no  avail  for  fixing  the  liability  of  the  drawer  or  iudoisers. 
Their  contract,  as  will  be  seen  hereafter,  requires  presentment  for  payment  oa 
the  day  of  maturity. 

2  N.  I.  L.  §  175  ;  also  §  110. 

*  Id.  §  176.     These  will  be  stated  under  the  Indorser's  Contract. 
4  N.  I.  L.  §  184.  6  Id.  §  182. 

6  Putnam  Bank  v.  Snow,  172  Mass.  569  ;  N.  I.  L.  §  142. 
'  Central  Bank  i;.  Richards,  109  Mass.  413. 


^ 


64  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  V. 

biJl  when  presented  for  the  purpose  ;  but  the  promise  to  accept 
may  be  made  at  the  very  time  when  the  bill  is  presented  for 
acceptance  ;  at  the  election  of  the  holder  to  receive  a  promise 
to  do  at  a  future  time  what  the  order  requires  presently.^  In 
this  case  however  the  holder  acts  at  his  peril  towards  the  drawer 
and  indorsers  (if  any)  of  the  time^  unless  thev  authorize  or  cop- 
sent  to  the  proceeding;  Jor  otherwise  the  bill  is  dishonored 
and  the  usual  steps  on  dishonor  must  be  taken  to  fix  the  lia- 
bility of  secondary  parties..  The  promise  too  may  be  absolute 
or  qualified,  as  in  the  case  of  acceptance  proper.  The  promise 
may  be  in  writing,  as  by  telegram,'^  or,  in  the  absence  of  stat- 
ute, oral  ;  if  in  writing  the  promise  need  not  be  and  probably 
never  is  written  upon  the  bill.  The  promise  should  clearly 
identify  the  bill.^ 

In  regard  to  the  nature  of  this  contract,  as  the  bill  of  exchange 
does  not  contemplate  anything  short,  of  acceptance  on  the  part 
Nature  of  the  ^^  ^^^^  drawee,  the  promise  to  accept  is  no  affair  of 
contract.  the  law  merchant.     It  belongs  to  contracts  of  the 

common  law,  modified  somewhat  however  by  its  connection  with 
an  instrument  of  the  law  merchant.  It  is  accordingly  subject 
to  the  limitations  of  the  common  law;  it  does  not  import  con- 
sideration ;  it  has  not  the  property  of  general  negotiability  or 
of  days  of  grace. 

The  nature  of  this  '  virtual '  acceptance  has  indeed  been  some- 
what obscured  at  times,  partly  by  the  term  'virtual  acceptance,' 
partly  because  the  act  relates  to  a  contract  of  the  law  merchant. 
But  it  is  clear  upon  the  better  authorities,  as  well  as  upon 
principle,  that  it  has  not  the  properties  of  a  contract  of  that 
law.  For  example:  A  in  Boston  draws  a  bill  of  exchange  on 
B  in  New  York,  payable  to  the  order  of  C,  and  informs  B  by 
letter  that  he  has  drawn  the  bill.  B  replies  by  letter  to  A, 
saying,  'Your  draft  will  be  duly  accepted.'  D  discounts  and 
becomes  holder  of  the  bill,  on  C's  indorsement.  D  cannot 
maintain  an  action  against  B,  because  the  contract  of  B,  if  any 

1  The  distinction  should  be  sharply  noticed  between  a  promise  to  accept 
and  a  promise  to  pay.    The  latter  is,  or  may  be,  acceptance  proper. 

2  Central  Bank  v.  Eichards,  109  Mass.  413. 
•  Coolidge  V.  Payson,  2  Wheat.  66. 


Sect.  3.J  ACCEPTOR'S   CONTRACT.  65 

was  created,  was  not  negotiable  or  transferrible.^  For  the  same 
roason  C  could  not  maintain  an  action  against  B. 

That  the  contract  of  the  '■  virtual '  acceptor  is  not  acceptance 
proper  in  any  case  is  shown  by  the  fact  that  the  holder,  that  is, 
any  holder,  may  insist  upon  acceptance  proper  notwithstanding 
the  virtual  acceptance,  or  rather  in  accordance  with  it  since  it 
is  a  promise  to  accept,  and  may  cause  the  bill  to  be  protested  for 
dishonor  if  acceptance  proper  is  refused.  It  differs  from  true 
acceptance  also  in  that  it  is  available  only  in  favor  of  him  to 
whom  it  was  made  or  one  who  has  taken  the  bill  in  reliance 
upon  the  promise  to  accept.^  Virtual  acceptance  is  in  fact  and 
in  law  a  separate,  independent  engagement  ;  the  bill  of  ex- 
change may  circulate  freely,  and  be  presented  for  payment  at 
maturity,  without  reference  to  its  existence. 

It  will  be  right  to  infer  that  the  promise  to  accept  is  not 
necessarily  binding  in  favor  of  the  holder  because  it  is  sup- 
ported by  a  valuable  consideration,  for  the  holder  may  not  have 
connected  himself  with  the  promise  by  taking  the  bill  in  re- 
liance upon  the  promise.  For  example :  For  valuable  consider- 
ation the  drawee  of  a  bill  promises  the  payee  to  accept  it,   if 

1  Worcester  Bank  v.  Wells,  8  Met.  107;  Exchange  Bank  v.  Rice,  107  Mass. 
87;  s.  c.  98  Mass.  288.  See  Henrietta  Bank  v.  State  Bank,  80  Texas,  648, 
651  ;  Grant  v.  Hunt,  1  C.  B.  44. 

2  Coolidge  V.  Payson,  2  Wheat.  16;  Putnam  Bank  v.  Snow,  172  Mass.  569; 
Central  Bank  v.  Richards,  109  Mass.  413 ;  Exchange  Bank  v.  Rice,  107  Mass. 
37  :  s.  c.  98  Mass.  288  ;  N.  I.  L.  §  142.  See  Henrietta  Bank  v.  State  Bank, 
80  Texas,  648;  Cases,  56.  Some  courts  have  held  that  a  promise  to  accept  an 
existing  bill  may  be  sued  upon  by  tlie  holder  whether  he  took  the  bill  on  the 
credit  of  the  promise  or  not.  Jones  v.  Bank  of  Iowa,  34  HI.  313;  Read  v. 
Marsh,  5  Mon.  8.  But  the  doctrine  is  unsound.  The  Statute  provides  that 
an  unconditional  promise  in  writing  to  accept  a  bill  before  it  is  drawn  is 
deemed  an  actual  acceptance  in  favor  of  every  person  who,  upon  the  faith  there- 
of, receives  the  bill  for  value.  N.  I.  L.  §  142.  But  that  is  not  to  be  taken  as 
meaning  that  such  acceptance  takes  the  place  of  acceptance  proper.  The 
Statute  in  the  same  connection  declares  that  the  holder  may  require  accept- 
ance on  the  bill,  §  140.  But  any  holder  may  no  doubt  elect  to  treat  the 
promise  of  the  Statute  as  performance,  i.  e.  as  acceptance  proper,  and  thus  sue 
upon  the  bill,  rather  than  upon  the  promise  to  accept.  If  however  the  bill 
should  not  be  drawn,  no  suit  could  be  brought  as  upon  an  accepted  bilL 
Allen  V.  Leavens,  26  Oregon,  164. 

6 


66  BILLS,  NOTES,  AND  CHEQUES.  [Chjlp.  V. 

presented  on  a  certain  day.  The  payee  now  indorses  the  bill 
to  the  plaintiff,  who  takes  it  without  knowledge  of  the  promise. 
Afterwards,  being  informed  of  the  promise,  the  plaintiff  pre- 
sents the  bill  to  the  drawee,  on  the  day  named  in  the  promise, 
for  acceptance,  which  is  refused.  Payment  is  also  refused  at 
maturity  of  the  bill.     The  drawee  is  not  liable  to  the  plaintiff.^ 

It  appears  however  to  be  unnecessary  for  the  virtual  acceptor 
to  make  a  promise  to  the  holder  when  once  he  has  given  his 
promise  to  accept  to  a  prior  party.^ 

The  incidents  of  this  contract  are  probably  the  same  as  those 
of  the  contracts  preceding  in  this  section ;  though  of  course  the 
Incidents  of  virtual  acceptor  does  not  admit  the  genuineness  of 
the  contract,  ^.jjg  drawer's  signature  unless  he  saw  the  signature 
before  promising  to  accept. 

*  Coolidge  V.  Payson,  2  Wheat.  66  ;  McEvers  v.  Mason,  10  Johns.  207  ; 
Exchange  Bank  v.  Rice,  98  Mass.  288  ;  s.  c.  107  Mass.  37;  Worcester  Bank 
V.  Wells,  8  Met.  107. 

2  Central  Bank  v.  Richards,  109  Mass.  413,  promise  by  telegram  to  accept 
a  bill,  made  to  the  drawers  and  next  day  shown  to  the  plaintiflF,  which  there- 
upon discounted  the  bill,  held  binding. 


Chai-.  VI]  CERTIFIER'S   CONTRACT.  6T 


CHAPTER  VI. 
CERTIFIER'S   CONTRACT.  *    fadtgsss-lr—  'CH  e< 

The  drawee  of  a  cheque  sometimes  writes  upon  it  tli»»  word 
*good,'  'accepted,'  or  the  like,  on  request  of  the  drawer,  or  of 
the  payee  or   other    holder.     This  is  done  with  a  ,,   ..,  . 

i^   •'         _  _  Certifying;  a 

view  to  using  the   cheque,  out  of  ordinary  course,   cheque:  Jt» 
as  a  means  of  credit,  as  for  instance  with  a  view  to 
passing  it  to  another  who  under  the  circumstances  cannot  pre- 
sent it  for  payment  at  once,  or  does  not  desire  to  do  so.^     The 
act  is  called  certification  of  the  cheque.^ 

Certification  is  not  in  terms  or  by  implication  called  for  by 
the  cheque  itself,  and  is  therefore  purely  a  voluntary  act  on  the 
part  of  the   drawee,  in  the  absence  of  any  special    . 

^  _  _  _  ''       "^  A  volnntary 

undertaking  to  certify.     The  result  is  that  refusal  act:  refusal  to 
to  certify  can  have  no  legal  consequences ;  no  notice 
of  dishonor  can  be  given  for  such  refusal,   since  to  refuse   to 
certify  is  not  to  refuse  what  the  cheque  requires,  to  wit,  pay- 
ment.    Refusal  to  certify   a   cheque   is  a  very  different   thing 
from  refusal  to  accept  a  bill  of  exchange,  as  will  be  seen. 

On  the  other  hand,  granting  the  request  to  certify  the  cheque 
is  a  very  different  thing  from  granting  the  order  to  accept  a  bill. 

Sometimes  done  by  the  use  of  the  word  'accepted,'   ^.„ 

''  ^        '      Differs  from 

and  even  in  the  Statute  loosely  spoken  of  as  '  equiv-  acceptinfc  a 
alent  to  an  acceptance,'  ^  it  is  only  '  acceptance  'of 
a  cheque,  a  term  to  be  avoided.      It  is  only  *  acceptance  '  or   '  an 
equivalent '  in  the  sense  that  it  is  a  promise   to  pay  the  cheque. 

1  Minot  V.  Russ,  156  Mass.  458,  is  one  of  many  illustrations. 

"^  Sometimes  promissory  notes  payable  at  bank  are  certified  by  the  bank, 
probably  with  much  the  same  effect,  except  as  to  time  of  payment  of  notes 
payable  at  a  future  day  named. 

»  N.  1.  L.  §  191. 


68  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  VL 

It  has  been  held  that  the  teller  of  a  bank  has  no  authority  in 
virtue  of  his  office  to  certify  cheques  drawn  upon  his  bank;  that 
Whomav  being  a  power  to  pledge   the  credit  of  the  bank, 

certify.  which    should   not    rest  by    law    with    an    inferior 

officer.^  The  contrary  would  be  true  of  the  president,  vice- 
president,  or  cashier."  It  is  however  usual  in  cities  to  confer 
power  upon  some  officer  of  the  bank,  generally  the  cashier,  it 
may  be  the  teller,  to  certify  the  cheques  of  customers  of  the 
bank,  in  so  far  as  they  have  funds  on  deposit.  And  of  such 
cases  it  is  held  that  certification  binds  the  bank,  in  favor  of  an 
innocent  holder  for  value,  though  in  point  of  fact  the  drawer 
had  at  the  time  no  funds  in  the  bank.  It  matters  not  whether 
the  certification  in  such  a  case  was  due  to  mistake  of  Jjie_banlv_ 
officer  or  not.^  The  certification  means,  not  that  the  drawer  has 
funds  at  the  time  of  the  certification,  and  will  continue  to  have 
them  when  payment  is  demanded,  but  that  the  bank  will  pay 
the  sum  to  the  holder  on  demand.* 

In  regard  to  the  nature  of  the  undertaking,  certification  is  an 
absolute  promise  to  pay  the  sum  named  in  the  cheque,  on  demand. 
Nature  of  the  ii^  the  absence  of  other  terms.  The  promise  is  at 
contract.  maturity  from  delivery  of  the  certified  instrument, 

until  the  lapse  of  a  reasonable  time,  when  it  becomes  overdue. 
Payment  may  be  demanded  any  time  before  the  Statute  of  Lim- 
itations bars  an  action,  so  far  as  the  liability  of  the  certifier  is 
concerned,  unless  the  time  of  payment  is  specified  in  the  certifi- 
cation, an  unusual  thing;  though  parties  secondarily  liable  (if 
any  consented  to  certification)  are  entitled  to  have  demand  for 
payment  made  on  the  certifier  before  the  expiration  of  a  reason- 
able time  from  the  certification.  The  certifier's  contract  is 
negotiable  or  not,  according  to  the  tenor  of  the  cheque.  The 
contract  is  one  of  custom. 

1  Mussey  v.  Eagle  Bank,  9  Met.  306.  But  see  Farmers'  Bank  v.  Butchers' 
Bank,  16  N.  Y.  125. 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

8  Farmers'  Bank  v.  Butchers'  Bank,  and  Merchants'  Bank  v.  State  Bank, 
Bupra. 

*  Mussey  r.  Eagle  Bank,  9  Met.  306. 


Chap.  VI.]  CERTIFIER'S   CONTRACT.  69 

The  incidents  of  the  contract  of  certification  appear  to  be  the 
same  in  many  respects  as  those  of  accepting  a  bill  of  exchange, 
but  not  in  all.     The  acceptor  of  a  bill  cannot  say  . 
that  the   drawer   had    no   funds  in  the  acceptor's  from  those  of 
hands,  and  that  the  acceptance   was  given  in  mis- 
take ;  ^  while  the  drawee  of  a  cheque  which  he  has  certified  ma j\ 
it  seems,  withdraw  his  certification,  on  discovering^  that  it  was 
given  in  mistake  on  the, point  of  funil^s,  unless  meantime  there 
has  been  a  change  of  po^^ition  by  the  holder,^ 

Again,  certification,  unlike  acceptance  of  a  bill,  not  being 
a  compliance  with  the  order  of  the  instrument,  it  results  that 
it  thedrawer  did,  not  procure  or  authorize  or  has  not  assentedTo] 
the  act  t^ere  is  no  contract  with  him,  and  of  course  none  with 
other  secondary  parties  who  have  not  authorized  or  assented  to 
it^  And  he  and  they  are  discharged  of  all  liabilitv.^  If  how- 
ever  the  drawer  procured,  authorized,  or  assented  to  the  certiti- 
cation,  he  cannot  afterwards  object  or  claim  that  his  order  has 
not  been  complied  with;  and  so  of  other  assenting  parties.* 

Certification  carries  with  it  no  doubt  the  usual  presumption 
of  consideration,  but  not  grace  because  payment  is  due  on 
demand. 

1  Ante,  p.  52. 

2  Irving  Bank  v.  Wetherald,  36  N.  Y.  335.  Sed  qu.  why  there  should  be 
less  duty  on  the  part  of  the  drawee  to  know  the  state  of  the  drawer's  funds 
than  the  genuineness  of  his  signature  ?  Payment  on  mistake  as  to  funds  is 
])ut  on  the  same  footing  as  certification  under  the  like  mistake.  Merchants' 
Bank  v.  Eagle  Bank,  107  Mass.  281,  285. 

3  Minot  V.  Russ,  156  Mass.  458  ;  First  National  Bank  i'.  Whitman,  94 
U.  S.  343,  345 ;  First  National  Bank  w.  Leach,  52  N.  Y.  350  ;  Born  v.  First 
National  Bank,  123  Ind.  78  ;  National  Bank  v.  Miller,  77  Ala.  168  ;  N.  I.  L. 
§195. 

*  Minot  V.  Russ,  supra ;  Bickford  v.  First  National  Bank,  42  111.  238  ; 
Rounds  V.  Smith,  id.  245  ;  Andrews  v.  German  Bank,  9  Heisk.  211.  The 
reasons  given  by  the  courts  vary,  and  are  not  always  satisfactory. 


K^  y*^  ^'^^^^rftK^Noffer^NS^EQUES.  [Chap.  VU 


CHAPTER  VII. 
DRAWER'S   CONTRACT.  UkltM*/  <^>i|-^*^  ^^^ 

Were-  \yy^<^<^tix:)KTiofii^^\^^^^^^l^-^ 

§   1.     Drawer:  Maker:  Indorse^^^^^^^jWOCI?^^^ 

First,  of  the  drawer  of  a  bill  of  exchange.  The  contract  of 
ll^W^ArCA^the  drawer  of  a  bill  of  exchange  must  be  set  in  strong  contrast 
•jt-cXd^*^*  uliarit  of  ^^  ^^^*  ^^  *^^®  maker  of  a  promissory  note;  in  no 
'J^J|^^**^^  drawer's  con-  ^^ay  are  the  two  alike.  The  contract  of  the  drawer, 
*^l^**'  ^  iMdi)rser's  in  whether  of  a  bill  or  of  a  cheque,  is  unlike  that  of 
^^  *  ^  most  respects,  ^j^^  maker  in  form,  in  that  it  does  not  appear  upon 
Jl^^lf^J*^  the  face  of  the  writing ;  it  is  unlike  the  contract  of  the  maker 
^^^*^  <i  in  effect,  in  that  the  contract  of  the  drawer  of  a  bill  is  conditional 
^{j^  j^mft^tul  secondary. 


'1 


The  contract  of  the  drawer  of  a  bill  of  exchange  is  in  the  main 
like  that  of  an  indorser.  The  drawer  stands  in  the  position  of 
first  indorser,  in  order  of  liability;  thus  the  order  of  liability  of 
parties  to  an  accepted  bill  is  this:  (1)  acceptor;  (2)  drawer,  vir- 
tually as  first  indorser;  (3)  payee,  virtually  as  second  indorser 
though  literally  first,  or  such  indorser,  if  any,  as  follows  nego- 
tiation;  and  then,  (4)  any  subsequent  indorsers  in  order.  If 
the  bill  is  not  accepted,  the  order  of  parties  begins  with  the 
drawer,  still  virtually  as  first  indorser,  and  then  proceeds  as  in 
the  case  of  an  accepted  bill.  It  will  be  sufiicient  here  to  state 
the  general  nature  of  the  drawer's  contract,  and  then  refer  the 
reader  to  the  chapter  on  the  Indorser's  Contract  for  details ;  for 
these,  so  far  as  the  drawer's  contract  agrees  with  the  indorser's, 
may  better  be  considered  there,  once  for  all.  Tliejiravver,  b^ 
drawing  the  bill,  engages  that  on  due  presentmentthe -bill  shall 
iMAHccepted  or  paid*  or  bothi  according  to  its  tenor,  and- that-if 
it  be  dishonored  and  tlie  proper  proceedings  on  dishonor  be  duly 
taken,  he  will  pay   the  amount  thereof  to  the  holder  or  to  any  _ 


Sitvr.  2]  DRAWEK'S   CONTRACT.  71 

subsequent  indorsor  who  may  be  compelled  to  payjj.  But  the 
drawer  may  iusert  in  the  bill  a  stipulation  negativing  or  limit- 
ing his  liability.^  He  admits,  as  an  incident  to  drawing  the 
bill,  the  existence  of  the  payee  and  his  capacity  at  the  time  to 
indorse.* 

§  2.     Right  to  Draw:  Reasonable  Ground.  .      ^  .     ■ 

Looking  a  little  deeper,   there  are,    between  the  contract  of      0 /?/%■* 
drawer  and  that  of  indorser,  several  substantial  legal  differences 

arising  from  the   very  nature  of    things.     A  man 

,  ,.,,,  ,  .  -    Differs  from 

who  draws  a  bill  of  exchange  is  naturally  and  indorser's  con- 
legally  supposed  to  have  something  to  draw  upon  respects?  want 

in  the  hands  of  the  drawee,   or  at  all  events  he  is  of  funds:  notice 

.of  dishonor, 
supposed  to  have  a  reasonable  expectation  that  the 

draft  will  be  accepted  and  paid  by  the  drawee;  that  is,  the 
drawer  is  supposed  to  stand  in  close  relation  to  the  drawee,  and 
to  have  good  ground  accordingly  for  drawing.^  An  indorser 
however  is  not  ordinarily  supposed  to  know,*  and,  in  fact, 
generally  does  not  know,  anything  about  the  state  of  things 
between  the  drawer  and  the  drawee  ;  and  though  his  indorse- 
ment is,  by  a  useful  fiction,  treated  as  equivalent  in  many 
respects  to  drawing  a  bill,  and  when  special,  as  where  the  in- 
dorsement itself  is  to  'order,'  is  also  in  form  like  a  bill  in  brief, 
still  it  is  not  a  drawing  by  one  having  or  supposed  to  have  funds 
with  the  drawee,  or  knowledge  of  the  action  to  be  taken  bj'  him ; 
that  is,  the  indorser  as  such  is  not  supposed  to  stand  in  any 
special  relation  to  the  drawee. 

It  results  from  this  difference  of  situation,  that  the  draw- 
ing of  a  bill  of  exchange  (and  the  same  is  true  of  a  cheque) 
may  operate  as  a  fraud;   and   a   drawing   which   may  operate 

1  N.  I.  L.  §  68. 

2  Id.     As  to  a  drawer  of  a  cheque  see  infra,  §  3. 
fi  See  N.  I.  L.  §  86. 

*  It  will  be  otherwise  where  the  instrument  was  made,  drawn,  or  accepted 
for  the  indorser's  accommodation.  See  N.  I.  L.  §  87.  So  one  who  indorses 
for  accommodation  of  the  drawer  of  a  bill,  both  knowing  that  there  is  no  rea- 
sonable ground  to  draw,  participates  in  the  (virtual)  fraud,  and  hence  is  not 
entitled  to  notice  of  dishonor.     Farmers'  Bank  v.  Van  Meter,  4  Rand.  553. 


72  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  VIL 

as  a  fraud  should  and  does  put  the  drawer  in  a  different  posi- 
tion from  that  of  an  honest  drawer,  and  different  therefore 
from  that  of  an  indorser.  The  drawer  in  such  a  case,  upon  dis- 
honor of  the  paper,  if  not  by  the  very  act  of  drawing,  is  in 
like  position  with  the  maker  of  a  promissory  note;  he  is  not 
entitled  to  notice  of  dishonor  at  any  rate.^  For  example  :  A 
KoMf^T  draws  a  bill  of  exchange  on  B,  payable  to  the  order  of  C,  having 
)rcit06ir  no  reasonable  ground  to  believe  that  the  bill  will  be  honored  by 
B;  and  it  is  not  honored  by  him.  A  is  liable  to  C  without 
notjce  of  „the^  dislionor.^ 

But  one  is  not  lightly  to  be  deemed  guilty  of  fraud;  and  it 
does  not  necessarily  make  one  guilty  of  fraud  to  draw  without 
having  provided  and  left  with  the  drawee  funds  with  which  to 
pay  one's  draft,  for  one  may  still  have  reasonable  ground  to 
expect  that  the  draft  will  be  honored.  Reasonable  ground  for 
drawing  is  the  test.^  The  exact  state  of  accounts  between  the 
drawer  and  the  drawee  may  not  be  known  by  the  drawer  at  the 
time  of  drawing;  the  accounts  may  be  fluctuating  from  time  to 
time,  and  balanced  only  at  considerable  intervals;  and  the  drawer 
may  reasonably  suppose  that  -the  balance  is  in  his  favor  to  the 
amount  of  the  draft ;  or  though  he  may  know  that  the  balance 
is  against  him,  he  may  have  had  assurance  from  the  drawee  that 
the  paper  will  be  honored;  or  he  may  have  felt  reasonably  justi- 
fied in  drawing  from  practice  between  himself  and  the  drawee 
in  such  cases.  Drawing  is  not  a  fraud  under  circumstances  of 
the  kind.* 

1  N.  L  L.  §  121,  4. 

2  Hopkirk  v.  Page,  2  Brock.  20  ;  Robinson  v.  Ames,  20  Johns.  146;  Orear 
V.  McDonald,  9  Gill,  350  ;  Wood  v.  Price,  46  111.  435  ;  Harness  v.  Davies 
Sav.  Assoc,  46  Mo.  356  ;  Dickens  r.  Beal,  10  Peters,  577  ;  Brown  v.  Maffey, 
15  East,  216  ;  Rucker  v.  Hiller,  16  East,  43.  It  seems  that  the  drawer 
would  be  liable  without  any  demand  upon  the  drawee;  for  why  demand 
payment  of  a  bill  unreasonably  drawn  ? 

3  See  the  cases  just  cited,  to  which  many  others  might  be  added.  A  few 
early  cases,  following  the  discredited  decision  in  Bikerdike  v.  Bollman,  1  T. 
R.  405,  are  contra.  See  Foard  v.  Womack,  2  Ala.  368  ;  Tarver  v.  Nance, 
5  Ala.  712 ;  and  certain  New  York  cases,  in  which,  however,  the  point  was 
not  raised.  The  true  rule  in  New  York  conforms  with  the  text.  Robinsoa 
V.  Ames,  20  Johns.  146. 

*  See  Dickens  v.  Beal,  10  Peters,  572 ;  Hopkirk  v.  Page,  2  Brock.  20. 


Sect.  2.]  DRAWER'S  CONTRACT.  73 

The  holder,  however,  makes  a  case,  it  seems,  against  the 
drawer,  by  showing  that  he  had  no  funds  in  the  hands  of  the 
drawee  when  the  bill  or  cheque  was  presented ;  it  is  then  for 
the  drawer  to  show,  if  he  can,  that,,  notwithstanding  the  want 
of  funds,  he  had  reasonable  ground  to  believe  that  the  paper 
would  be  honored,  and  hence  that  the  usual  steps  for  fixing  the 
liability  of  a  drawer  should  have  been  taken.^ 

The  '  reasonable  ground '  of  the  rule  may  relate  either  to  the 
time  of  the  drawing  of  the  instrument,  or  to  the  time  of  present- 
ment. Hence,  the  drawer  may  fall  without  the  Time  of  reason, 
protection  of  the  rule  even  where  he  had  funds  ap-  ^^^^  ground. 
plicable  to  the  draft  at  first,  or  on  the  way,  to  meet  it,  for  he 
may  withdraw  or  intercept  them,  and  then  have  no  reasonable 
ground  to  expect  that  the  paper  will  be  honored.'-^  On  the  other 
hand  if  the  drawer  has  funds  when  the  bill  is  presented  for 
payment,  he  is  entitled  to  notice,  though  he  may  not  have  had 
funds  when  he  drew  the  bill  or  reason,  then,  to  expect  that  the 
bill  would  be  honored.^ 

In  regard  to  what  amounts  to  reasonable  ground,  it  is  laid 
down  that  there  must  be  something  more  than  that  which 
would  excite  an  idle  hope  or  a  bare  expectation, — something 
more  than  a  remote  probability.  There  must  be  a  prospect 
such  as  would  create  a  full,  sober  expectation  or  strong  proba- 
bility that  the  paper  will  be  honored;  such  a  state  of  things 
as  would  induce  a  merchant  of  common  prudence  and  fair  re- 
gard for  his  commercial  credit  to  draw  the  draft.*  The  fact 
that  the  drawee  is  indebted  to  the  drawer  would  create,  pre- 
sumptively, a  case  of  the  kind,  though  in  point  of  fact  the 
drawer  have  no  funds  in  the  drawee's  hands. ^  The  case  would 
probably  be  different  if  the  existence  of  the  debt  were  in  dis- 
pute. For  example :  A  draws  a  bill  of  exchange  on  B,  for  an 
amount  which  A  expects  to  recover  against  B  in  a  contested 

*  Harness  v.  Davies  Sav.  Assoc,  46  Mo.  357  ;  Story,  Bills,  §  312, 

^  N.  I.  L.  §  121,  5:  'Where  the  drawer  has  countermanded  payment.' 
»  See  Gage  Hotel  Co.  v.  Union  Bank,  171  111.  531. 

*  See  cases  in  note  2,  p.  72. 

5  Walker  v.  Rogers,  40  111.  278. 


74  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  VH 

suit  by  A  against  B.     A  has  drawn  without  funds  or  reason- 
able ground  to  draw.^ 

The  drawer  may  have  reasonable  ground  to  draw  in  certain 
cases,  before  any  debt  exists,  by  having  an  indisputable  expecta- 
tion of  one,  as  where,  having  made  a  consignment  to  another,  he 
draws  before  the  consignment  has  reached  the  consignee. '^  Nor 
does  it  affect  the  case  that  the  consignment,  by  depreciation  of 
value,  may  have  become  insufficient  to  meet  the  bill,  for  that 
was  not  to  be  foreseen ; '  if  it  was  foreseen  by  the  drawer,  or 
was  understood  by  him  to  be  inevitable,  the  case  would  prob- 
ably be  different.  Again,  it  makes  no  difference,  and  for  the 
same  reason,  that  the  consignment  may  never  have  reached  the 
consignee.^  So  again  the  drawer  has  reasonable  ground,  where 
a  debtor  of  his  requests  him  to  draw  on  a  certain  person,  who 
is  represented  by  the  debtor  to  be  indebted  to  him,  especially 
where  the  drawee  accepts  (afterwards  refusing  to  pay).°  But 
the  drawer  of  a  bill  who  lias  no  funds  with  the  dray^,  except 
that  he  has  supplied  him  with  goods  on  credit,.. i^hich  credit 
does  not  expire  till  long  after  the  bill  becomes  d^\\Q,  has  np 
reasonable  ground  to  droM^.^ 

%he  fact  tnat  tlie  bill  may  have  been  accepted  by  the  drawee 
has,  by  the  weight  of  authority,  no  decisive  bearing  upon  the 
Effect  of  ac-  question  of  the  right  of  the  drawer  to  draw.''  Ac- 
ceptance, ceptance  may  perhaps  require  the  holder  to  await 
the  maturity  of  the  bill,  and  then  present  it  again  for  payment, 

1  Benoist  v.  Creditors,  18  La.  522  ;  Williams  v.  Brashear,  19  La.  370. 
The  second  of  these  cases  shows  that  the  test  of  absence  of  funds  is  not  con- 
<'hisive  ;  only  the  absence  of  reasonable  ground  is  conclusive. 

2  Dickins  v.  Beal,  10  Peters,  572  ;  Orear  v.  McDonald,  9  Gill,  350 ; 
Grosvenor  v.  Stone,  8  Pick.  79. 

3  Robinson  v.  Ames,  20  Johns.  146.     See  Rucker  v.  Hiller,  16  East,  43. 

*  Byles,  Bills,  301,  13th  Eng.  ed. 

*  Byles,  ut  supra,  citing  Lafitte  v.  Slatter,  6  Bing,  623. 
«  Id.,  citing  Claridge  v.  Dalton,  4  Maule  &  S.  226. 

'  See  Rhett  v.  Pop,  2  How.  457  ;  Valk  v.  Simmons,  4  Mason,  113  ;  Allen 
».  King,  4  McLean,  128  ;  Kinsley  v.  Robinson,  21  Pick.  327  ;  Gillespie  v. 
Cammack,  3  La.  An.  248  ;  Foard  v.  Woraack,  2  Ala.  368,  371  ;  HoflFman  v. 
Smith,  1  Gaines,  157,  160.  But  see  Pons  v.  Kelly,  2  Hayw.  45,  47  ;  Richie 
V.  McCoy,  13  Smedes  &  M.  541.     See  also  Orear  v.  McDonald,  9  Gill,  350, 

4^8. 


Sect.  2.]  DRAWER'S   CONTRACT.  75 

though  that  is  by  no  means  clear;  but  whether  that  be  the  case 
or  not,  acceptance  does  not  certainly  show  that  the  drawer  had 
reasonable  ground;  at  most  it  but  indicates  a  presumptive  right 
to  draw,  and  hence  only  presumptively  entitles  the  drawer  to 
insist  upon  the  usual  steps  for  fixing  his  liability.* 

a.  Drawing  Ohi  O'^c^fLf 

Another  special  feature  of  a  drawer's  contract  is  that  where 
the  drawer  draws  upon  himself  he  is  not  entitled  to  notice  if  the 
paper  is  dishonored;^  for,  drawing  upon  himself,  Drawing  on 
he  was  in  honor  bound  to  accept.  He  may  accord-  ""^'^  *^'** 
ingly  be  treated  as  the  maker  of  a  promissory  note.^  In  that 
view  it  seems  to  be  unnecessary  to  make  any  demand  of  accept- 
ance or  payment  of  him.  The  same  is  true  where  a  corporation 
or  a  partnership  draws  upon  itself,  or  where  one  draws  upon  a 
partnershi})  of  wliich  one  is  a  member;  and  so  also,  it  seems, 
of  the  case  of  drawing  paper  by  one  partnership  upon  another, 
where  the  defendant  drawer  is  a.  member  of  both. 

§  3.     Drawer  of  Cheque. 

What  has  been  said  in  the  last  section  applies  mainly  to  bills  3*  DRA 
of  exchange,  though  it  is  proper  to  notice  that  the  drawer  of  a^p  £_|g  , 
cheque  may,  for  some  special  reason  not  relating  to  pgp„,iarity  of  NaT*0 
funds,  have  had  no  reasonable  ground  to  draw,  and  drawer's  con-  i^ins: 

so  be  liable  much  like  the  maker  of  a  note.*     But 
the  contract   of  the   drawer  of   a  cheque    is   in   itself  peculiar, 
as  we  have  elsewhere  seen.^ 

The  peculiarity  of  the  contract  in  question  is  due,  of  course, 
to  the  special  nature  of  a  cheque.  Cheques  have  sometimes 
been  called  bills,  in  cases  in  which  it  was  not  necessary  to 
observe  any  distinction  between  the  two  kinds  of  paper;  but  it 
is  never  safe  to  assume  that  things  which  are  alike  are  the  same, 

J  See  2  Daniel,  Neg.  Inst.  §  1082. 

2  N.  I.  L.  §  121,  1. 

'^  Fairchild  v.  Ogdensburgh  R.  R.  Co.,  15  N.  Y.  337  ;  Miller  v.  Thomson, 
3  Man.  &  G.  .576. 

«  See  Carew  v.  Duckworth,  L.  R.  4  Ex.  313  ;  Gage  Hotel  Co.  v.  Union 
Bank,  171  111.  531. 

*  Ante,  p.  12. 


jr^ 


76  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  VIl 

and  it  is  certain  that  cheques  are  not,  even  in  substance,  bills 
of  exchange. 
^  ^-atj.  O       /  ^^  ^^^^  ^^  exchange  is  supposed  to  have  been  drawn,  a3  has 
fju  Q^^^*  iv^lready  been  seen,  either  upon  funds  in  the  hands  of  the  drawee, 
JU<m,^Jjl1    1  ^^  upon  reasonable  ground  to  believe  that  the  drawee  will  honor 
I   it;  a  cheque  is  always  supposed  to  have  been  drawn  upon  funds. 
The  drawer  of  a  cheque  draws  upon  his  own  banker,  who,  where 
the   transaction   is   rightful   on   the  part   of   the   drawer,   holds 
.    money   of  the  drawer   subject    to  his    order  as    manifested    by 
^    cheques.     A  bill  of  exchange  is  oftener  drawn  upon  some  mer- 
chant or  trader.     The  cheque  is   drawn  with  a  view  to  prompt 
payment  rather   than   to  use   as  a  means   of  credit,^  —  though 
merely  to  put  a  cheque  into  circulation  is  not  in  itself  improper, 
^  as  to  discharge  the  ji^Kts^jaT  bill  ofexcnftnge  only  pe^ 
its  ordinary  function  when  it  is  put  into  circulation;  the  one  is 
drawn  to  obtain  money,  the  other,  often   to  give  credit  and  to 
take  the  place  of  mone}^  as  far  as  desired. 

The  consequence  which  the  law  merchant  annexes  to  this  dif- 
ference is  that  the  drawer  of  a  dishonored  cheque,  not  drawn 
upon  sufficient  ^  funds  applicable  to  it,  is  in  the  position  sub- 
stantially of  the  maker  of  a  promissory  note;  at  all  events,  he 
is  liable  to  the  holder  without  notice  of  dishonor.^  Indeed,  the 
drawer  of  a  cheque  remains  liable,  it  seems,  without  notice  of 
dishonor,  though  he  had  funds  in  the  hands  of  the  drawee,  pro- 
vided he  has  not  suffered  prejudice  by  the  failure  to  give  him 
notice,  or  to  make  an  earlier  demand  than  was  made.*  The 
drawer  of  a  bill,  as  we  have  seen,  would  be  discharged  in  such 

The  case  of  the  drawer  of  a  cheque  thus  far  may  be  put  in 
Want  of  no-  ^^is  way:  Prima  facie,  the  drawer  is  entitled  to 
tice:  prejudice,  notice  of  dishonor;  hence,  the  plaintiff  must  offer 
some  legal  excuse  for  the  omission  when  he  has  failed  to  give 

1  Mussey  v.  Eagle  Bank,  9  Met.  306. 

2  Carew  v.  Duckworth,  L.  R.  4  Ex.  313. 

8  Andrew  v.  Blackly,  11  Ohio  St.  89  ;  Carew  v.  Duckworth,  supra.      • 
*  Pack  V.  Thomas,  13  Smedes  &  M.   11  ;  Mohawk  Bank  v.   Broderick,  10 

Wend.  304,  affirmed,  13  Wend.   133  ;  True  v.  Thomas,  16  Maine,  36.     See 
Keene  v.  Beard,  8  C.  B.  x.  s.  372. 


Sect.  3.]  DRAWER'S  CONTRACT.  77 

otTUcMsutJC 

such  notice.^     Still,  if  he  can  show  that  the  drawe^ias  not,  in 

point  of  fact,  suffered  prejudice  by  the  omission,  the  plaintiff 
can  maintain  his  action  against  him.^ 

The  drawer  of  a  cheque  is,  in  a  word,  treated  as  the  principal 
debtor  sub  modo;  he  is  not  discharged  either  by  failure  to  make 
presentment  within  the  time  required  in  the  case  of  a  bill  of 
exchange  payable  (like  a  cheque)  on  demand,  or  by  want  of  no- 
tice of  dishonor  upon  presentment  and  refusal  to  pay,  unless  the 
drawer  has  suffered  some  loss  or  prejudice  thereby,  and  then 
only  to  the  extent  of  his  loss.^  Reasonable  ground  to  draw 
will  not  help  the  drawer  of  a  cheque  in  such  a  case.  For  ex- 
ample (hypothetical)  :  A  draws  a  cheque  on  his  banker  B,  pay- 
able to  C  or  order.  C  holds  the  cheque  for  a  week  ;  within 
which  time,  on  any  day,  he  might  reasonably  have  presented  it 
to  B  for  payment.  When  the  cheque  was  drawn,  B  was  solveut 
and  paying  his  customers'  cheques,  and  continued  to  do  so  for 
several  days  afterwards.  Before  the  cheque  is  presented  B  stops 
payment,  and  the  cheque  is  dishonored,  and  A  is  not  notified. 
Subsequently  B  makes  an  arrangement  with  his  creditors,  and 
ultimately  pays  them,  including  A,  in  full.  A  is  liable  on  the 
cheque  regardless  of  the  delay  in  presenting  it,  and  the  want  of 
notice  of  dishonor.  Again:  In  the  same  case,  C  omits  for  ten 
days  to  present  the  cheque,  though  he  might  have  presented  it 
on  any  day  before.  Meantime  B  fails  ;  but  before  his  failure 
A  withdraws  all  his  funds  from  B.  A  is  not  discharged  by  C's 
delay.*      Again :    In   the   same   case  B  compromises  with  his 

1  Kirkpatrick  v.  Puryear,  93  Tenn.  409  ;  Chitty,  Precedents  in  Pleading, 
]17,  3d  Lond.  ed.  See  id.  form  15,  p.  83;  Carew  v.  Duckworth,  L.  R. 
4  Ex.  313,  declaration  ;  Kemble  v.  Mills,  1  Man.  &  G.  757,  769,  approving 
form  in  Chitty.  Nor  can  the  holder  have  recourse,  in  such  a  case,  to  the 
original  cause  of  action,  in  the  absence  of  evidence  permitting.  Kirkpatrick 
V.  Puryear,  supra ;  Carroll  v.  Sweet,  13  L.  R.  A.  43  ;  s.  c.  128  N.  Y.  19  ; 
Smith  V.  Miller,  43  N.  Y.  171 ;  52  N.  Y.  545. 

2  First  National  Bank  v.  Buckhannon  Bank,  80  Md.  475. 

3  Hey  wood  i;.  Pickering,  L.  R.  9  Q.  B.  428  ;  Robinson  v.  Hawksford,  9  Q.  B. 
62 ;  Little  v.  Phenix  Bank,  2  Hill,  425,  428  ;  Bell  v.  Alexander,  21  Gratt. 
1 ;  Morrison  v.  McCartney,  30  Mo.  183  ;  Griffin  v.  Kemp,  46  Ind.  172.  See 
Keene  v.  Beard,  8  C.  B.  n.  s.  372 ;  N.  I.  L.  §  193. 

*  Kinyon  v.  Stanton,  44  "Wis.  479. 


78  BILLS,  >;OTES,  AND    CHEQUKb.  [Chaf.  VIL 

creditors,  including  A,  at  fifty  cents  on  the  dollar.  A  is  liable 
on  the  cheque  for  half  the  sum  named  in  it.  Again :  In  the 
same  case  A  leaves  all  his  funds  with  B,  and  loses  the  whole. 
A  now  is  discharged  by  reason  of  C's  delay. ^ 

On  the  other  hand,  the  holder  of  a  cheque  is  protected  (with 
an  exception  to  be  mentioned)  where  he  has  exercised  the 
Diligence  of       diligence    which    would    satisfy   the    law    in    the 

cheque:  circu-  ^^^^  ^^^^  *^^  ^  ^^^1  ^^  exchange;  in  such  a  case  no 
lation  ot  same,  showing  of  loss  or  prejudice  due  to  failure  to  exer- 
cise greater  diligence  would  be  heard.  For  example:  The 
holder  of  a  cheque  which  he  receives  on  Saturday'  morning  pre- 
sents it  on  Monday  afternoon  during  banking  hours,  and  the 
cheque  is  dishonored,  —  the  bank  having  stojjped  payment 
Monday  at  noon.  The  holder  might  have  presented  the  paper 
on  Saturday,  or  on  Monday  before  noon,  when  it  would  have 
been  paid.  The  diligence  required  in  the  case  of  a  bill  of  ex- 
change has  been  exercised,  and  the  drawer  is  not  discharged.'** 
3^  And  even  though  the  holder  fail  to  exercise  the  diligence 
which  would  be  required  if  the  cheque  had  been  a  bill  of  ex- 
change, the  drawer  will  be  discharged  only  to  the  extent  of 
prejudice.  Whether  the  delay  is  in  demand  of  payment  or  in 
the  giving  of  notice  of  dishonor,  or  in  both,  makes  no  difference. 
This,  however,  supposes  that  the  cheque  has  been  kept  out 
unduly.  The  difference  between  a  cheque  and  a  bill  in  that 
respect  has  already  been  noticed;  a  bill  payable  at  or  after 
sight  may  be  kept  out  in  circulation  for  a  long  period  of  time 
without  affecting  the  liability  of  any  of  the  parties,  though  the 
drawee  fail,  meantime,  to  the  prejudice  of  the  drawer;  whereas, 
a  cheque  should  with  reasonable  promptness   be   presented  for 

1  Kinyon  v.  Stanton,  44  Wis.  479  :  Jones  v.  Heiliger,  .36  Wis.  149.  Ia,^lJ^ 
of  these  cases  the  driiwer  of  a  bill  would  be  'lischarg£,d.  It  should  be  remem- 
bered that  neither  a  cheiiue  nor  a  bill  of  exchange  operates  as  an  assignment 
of  the  fund  or  (until  acceptance,  in  the  case  of  a  biU.)  makes  tliedr^TCga 
debtor  to  the  hold^.  In  some  States,  however,  drawing  a  cheque  operates 
a.s  an  assignment  of  the  amount  called  for.  Munn  v.  Burch,  25  111.  35. 
Ante,  p.  50. 

2  See  Story,  Notes,  §  493  ;  Bills,  §§  470,  471  ;  Burkhalter  v.  Second  NaU 
Bank,  42  N.  Y.  538  ;  Simpson  v.  Pacific  Ins.  Co.,  44  Cal.  139. 


^*  ^^^Jcf.  t]  DRAWER'S  CONTRACT.  79  ' 

payment,^  which  mean'  if  the  holder  and  drawee  reside  in  tho/^y^j; ^jp^ 
same  place,  on   the   day,  or   day  after,  it  is  taken,'  or,  if  the^jj^^r^j^t^  ^ 
reside  in  different  places,  that  it  should  be  sent  forward  to  he,^.^^/^^  ^' 
presented  for  payment  on  the  day,  or  day  after,  it  is  taken,  exX**i)C  .1  \ 
eluding    in  either   case  non-secular  days,  —  unless  a  sufficient'^      •»/t# 
reason  for  not  doing   so  is  shown ;  on   pain  of   discharging  th^A^*»#9<0 
drawer  to  the  extent  of  any  prejudice  to  him  by  the  default.' 
That   is  what  is  meant,  it   seems,  by  the  statement   sometimes 
made,  that  the  holder  of  a  cheque  is  bound  to  greater  diligence 
than  the  holder  of  a  bill ;  *  and  the  statement  is  founded  upon 
the  fact  that  a  cheque  is  not  naturally  an  instrument  of  credit. 

§  4.     Presentment  for  Acceptance. 

For  most  purposes  there  is  no  occasion  for  separating  the 
contract  of  drawer  fi'om  that  of  indorser  in  regard  to  present- 
ment for  acceptance  ;  what  is  true  of  the  one  case  peculiarity  of 

is  true  of  the  other,  and  hence  the  subject  will  be  drawer's  situa- 

.  .  .  .  .,,       tion :  drawer 

reserved,   m  the  mam,  for  consideration  with  the  contracts  for 

other   subjects   belonging    in   common   to  drawing  ^<^*^^Pt*nce. 
and    indorsement,    and    treated  under    the    latter    head  as    the 
larger  one.^ 

There  is  one  phase,  however,  of  the  law  relating  to  present- 
ment for  acceptance  which  is  peculiar  to  the  drawer's  contract; 

^  N.  1.  L.  §  193:  'A  cheque  must  be  presented  for  payment  within  a 
reasonable  time  after  its  issue.'  Watts  v.  Gans,  114  Ala.  264.  Reasonable 
time  in  the  case  of  a  cheque  is  the  shortest  time  within  which,  consistently 
with  ordinary  business,  presentment  can  be  made.     Watts  v.  Gans. 

2  Smith  V.  Miller,  43  N.  Y.  171  ;  s.  c.  52  N,  Y.  545  ;  Burkhalter  v. 
Second  Nat.  Bank,  42  N.  Y.  538  ;  Simpson  v.  Pacific  Ins.  Co.,  44  Cal.  139  ; 
Alexander  v.  Burchfield,  7  Man.  &  G.  1061. 

8  Prideaux  i;.  Criddle,  L.  R.  4  Q.  B.  455  ;  Gregg  v.  Beane,  69  Vt.  22,  26  ; 
Kirkpatrick  v.  Puryear,  93T6nn.  409  ;  Watts  y.  Gans,  114  Ala.  264  ;  Industrial 
Trust  Co.  V.  Weakley,  103  Ala.  458.  See  Woodruff  v.  Plant,  41  Conn.  344. 
There  should  be  no  unnecessary  use  of  agents,  with  their  days  of  additional 
time.  Gregg  v.  Beane,  supra.  Unless  the  cheque  is  drawn  for  circulation, 
or  unless  statute  authorize.  Id.  See  First  National  Bank  v.  Miller,  37  Neb. 
600  ;  Gilford  v.  Hardell,  88  Wis.  538  ;  Holmes  v.  Roe,  62  Mich.  99. 

*  Mohawk  Bank  v.  Broderick,  10  Wend.  304,  307,  affirmed,  13  Wend 
133  ;  Gough  v.  Staats,  13  Wend.  549,  551,  552. 

6  See  N.  I.  L.  §§  150  et  seg^ 


80  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  VIL 

unless,  indeed,  there  happen  to  be  an  indorsement  upon  the 
paper  when  it  is  so  presented,  in  which  case  the  law  would 
apply  to  the  indorsement  as  well.  A  bill  of  exchange  payable 
at  a  stated  time  after  date  need  not  be  presented  for  acceptance.^ 
However,  according  to  the  better  doctrine  of  the  law  merchant, 
the  drawer's  contract,  in  the  case  of  a  bill  of  exchange,  looks, 
in  all  cases  in  which  the  bill  is  not  payable  on  demand,  to  an 
acceptance  as  well  as  to  payment  by  the  drawee.  That  is,  the 
drawer  is  understood  to  engage  in  favor  of  the  payee,  or  sub- 
sequent holder,  that  the  drawee  will  give  him,  at  any  time,  the 
special  security  of  acceptance;^  which  of  course,  in  the  case 
of  paper  payable  after  date,  or  a  stated  time  after  sight,  may  be 
long  before  the  maturity  of  the  bill,  and  thus  be  a  matter  of 

great  importance.  AHT/liy^/rTDR  f      Bk  fift<^h 

That  undertaking  of  the  drawer  may  be  broken  by  the  refusal 
of  the  drawee  to  accept  the  bill ;  there  being  then,  upon  due 
notice  (which  the  law  requires),  a  breach  of  contract  on  the 
part  of  the  drawer,  he  is  in  principle,  and  by  the  current  of 
authority,  liable  on  the  bill  at  once,  regardless  of  the  fact  that 
payment  of  the  bill,  by  the  drawee,  may  not  be  required  by  the 
order  for  a  long  time  thereafter.  For  example:  A  draws  a  bill 
of  exchange  on  B,  in  favor  of  C,  dated  Jan.  1,  1893,  payable 
three  months  after  date.  On  Jan.  2,  1893,  C  presents  the  bill 
to  B  for  acceptance,  and  acceptance  is  refused;  the  paper  is 
duly  protested,  and  A  is  duly  notified.  A  is  liable  on  the  bill 
at  once  ;  C  need  not  wait  until  the  time  stated  in  the  bill  before 
suing.® 

The  real  meaning  then  of  the  drawer's  contract,  in  the  eye  of 
the  law  merchant,  is  that  the  holder  shall  have  the  drawee's 
acceptance  if  he  desires  it,  which  being  given,  he  shall  then 
have  payment  by  the  drawee  at  the  stated  time  ;  but  that,  if 
the  drawee  refuse  acceptance  (or  payment),  the  sum  shall  be 
due  at  once  from  the  drawer;*  though  it  must  be  remembered 

1  Walker  v.  Stetson,  19  Ohio  St.  400. 

2  Aymar  v.  Sheldon,  12  Wend.  439. 

8  3  Kent,  95;  Bank  of  Washington  v.  Triplett,  1  Peters,  25  ;  Union  Bank 
V.  Hyde,  6  Wheat.  572  ;  Weldon  v.  Buck,  4  Johns.  144  ;  Mason  v.  Franklin, 
3  Johns.  202  ;  Thompson  v.  Gumming,  2  Leigh,  321. 

*  N.  I.  L.  §  158. 


SiiCT.  4.]  DRAWER'S  CONTRACT.  81 

t])at  it  is  part  of  the  drawer's  contract,  in  ordinary  cases,  that 
all  steps  necessary  to  liability  in  other  cases  shall  be  taken, 
whether  on  non-acceptance  or  non-payment  after  acceptance. 
Indeed,  though  2:)resentment  for  acceptance  may  be  unnecessary^ 
yet  if  asked  for  and  refused  tlie  usual  steps  are  required  on  pain 
of  flh-ilturgiiKj  tlie  drawer^aud  not  merely  for  the  purpose _of 
fixJDg  his  liability'. 

All  this,  it  must  be  understood,  is  applicable  to  paper  pay- 
able at,  or  at  a  stated  time  after,  sight,  as  well  as  to  paper 
payable  at,  or  at  a  stated  time  after,  date,  save  that  present- 
ment for  acceptance  in  the  former  case  is  necessary.  And,  as 
has  already  been  intimated,_jf  there  happen  to  be  an  indorse- 
ment  upon  the  paper,  the  indorser  also  may  be  made  liable,  and 
!-ij(m]  at  once  ;  for  his  contract,  as  well  as  that  of  the  drawer^s 
broken. 

In  Pennsylvania,  however,  a  special  view  of  the  law  merchant 
upon  the  foregoing  subject  obtains.  It  is  there  held  that  where 
presentment  for  acceptance  is  made  in  a  case  in  which  the  step 
is  unnecessary,  as  it  is  where  the  paper  is  payable  at  a  stated 
time  after  date,  presentment  for  acceptance,  if  refused,  is  to  be 
regarded  as  nugatory,  — that  is,  no  rights  can  arise  against  the 
drawer.  The  holder  nmst  wait  until  the  stated  time  for  pay- 
ment arrives,  and  then  present  the  paper  for  payment  as  if 
nothing  before  had  been  done.^  If  presentment  was  necessary, 
refusal  to  accept  would  probably  give  an  immediate  right  of 
action,  in  Pennsylvania  as  well  as  elsewhere,  assuming  that  all 
steps  were  taken;  for  now  the  holder  has  done  an  act  which  the 
drawer  required  him  to  do. 

The  Statute  deals  with  presentment  for  acceptance  thus :  Such 
presentment  must  be  made  (1)  where  the  bill  is  payable  after 
sight,  or   in  any  other  case  whei^^r_ejgiLtja3£BJLiar  -^yj^g^g 
acceptance  is  necessary  to  fix  the  maturity  of  tlie  ment  to  be 
instrument;    (2)    where   the    bill   expressly   stipu-  ^^  ^' 
lates  for  such   presentment ;    or  (3)  where    the    bill    is    drawn 
payable  elsewhere  than  at  the  residence  or  place  of  business  of 

^  House  V.  Adams,  48  Penn.  St.  261. 
6 


82  BILLS,  NOTES,  AND  CHEQUES.  {Chap.  VII 

the  drawee.  In  no  other  case  is  presentment  for  acceptance 
necessary  to  make  any  party  to  the  bill  liable.^ 

Except  as  otherwise  provided  by  the  Statute,  the  holder  of  a 
bill  required  as  just  stated  to  be  presented  for  acceptance  must 
Failing  to  present    it    for  acceptance   or   negotiate   it   within 

present.  reasonable  time;  failing  which,  the  drawer  and  all 

indorsers  are  discharged.^ 

Presentment  for  acceptance  must  be  made  at  a  reasonable 
hour,  on  a  business  day,  and  before  the  bill  is  overdue,  to 
At  what  time  the  drawee  or  some  one  authorized  to  accept  or 
to  be  made.  refuse  acceptance  on  his  behalf.*  If  addressed  to 
two  or  more  not  partners  the  bill  must  be  presented  for  ac- 
ceptance  to  all  of  them,  unless  one  is  authorized  to  act  for  the 
rest,  when  presentment  to  him  alone  will  suffice.*  Where  the 
drawee  is  dead,  presentment  may  be  made  to  his  personal  repre- 
sentative.^ If  the  drawee  has  been  adjudged  bankrupt  or  insol- 
vent, or  has  made  an  assignment  for  creditors,  presentment  may 
be  made  to  him  or  to  his  trustee  or  assignee. 

A  bill  may  be  presented  for  acceptance  at  any  time  when  a 
negotiable  instrument  may  be  presented  for  payment.  When 
(by  the  New  York  Statute)  Saturday  is  not  otherwise  a  holiday, 
presentment  for  acceptance  may  be  made  before  noon  thereof.® 

A.  bill  is  dishonored  by  non-acceptance  (1)  when  duly  pre- 
sented for  acceptance,  such  acceptance  as  the  Statute  requires  is 
What  is  dis-  refused  or  cannot  be  obtained  ;  or  (2)  where  pre- 
honor.  sentment  for  acceptance  is  excused  and  the  bill  is 

not  accepted.'' 

]f  a  bill  duly  presented  for  acceptance  is  not  accepted  within 

the  time  prescribed,  the  person  presenting  it  must  treat  the  bill 

iiri.  ..  u  J  as  dishonored  or  lose  his  ritjht  of  recourse  against 
Whattobedone  _  °  ... 

if  acceptance      the    drawer   and    indorsers.*     If   the   bill    is   dis- 
honored by  non-acceptance  immediate  recourse  may 
be  had  against  the  drawer  and  indorsers,  and  no  presentment 
for  payment  is  necessary.^ 


1  N.  I.  L.  §  150. 

2  Id.  §  151. 

»  Id.  §  152,. 

♦  Id.  §  152,  1. 

fi  Id.  2. 

«  Id.  §  153 

'  Id.  §  156. 

»  Id.  §  157. 

9  Id.  §  158 

S»CT.  1.]  DJDORSEK'S  CONTRACT.  &J 

(     DR^f^ 


CHAPTER   VIII. 
INDORSER'S   CONTRACT 

(including   drawer's,    of   the   8AME    TEMCIjK']^ 

§  1.     Drawkr  and  Indorser:  Definition. 

In  accordance  with  what  was  said  in  the  chapter  relating  to 
the  Drawer's  Contract,  all  that  part  of  the  drawer's  contract 
which  is  of  the  same  tenor  as  the  contract  of  an  Subject  for 
indorser  will  be  considered  under  the  present  head,  consideration, 
and  that  too  without  further  mention,  except  so  far  as  may  be 
needful,  of  the  drawer.  That  is  to  say,  all  that  hereafter  ap- 
pears in  regard  to  the  indorser's  contract  will  apply  equally  to 
the  contract  of  drawer;  what  is  peculiar  to  the  drawer's  contract 
having  been  considered  in  Chapter  VII.  '  Indorser  '  therefore 
should  be  taken  to  include  drawer,  in  this  chapter  and  others, 
so  far  as  the  contracts  of  the  two  are  alike. 

Indorsement  is  an  act  whereby  a  person,  not  being  acceptor  or 

quasi-acceptor,  surety  or  guarantor  proper,  writes  his  name  upon 

the  back  or  face  ^  of  a  duly  executed,  negotiable  bill  .„, 

''  .  What  consti- 

of  exchange,  promissory  note,  or  cheque,^  with  or  tutes  indorse- 
without  terms  of  contract  or  liability,  according  to 
the  law  merchant,  or  writes  an  equivalent  contract  on  a  separate 
paper,  annexed  to  the  bill,  note,  or  cheque;  ^  to  which  act  the 

»  Shain  v.  Sullivan.  106  Cal.  208. 

^  A  ue£fotinble  cheque  may  be  indorsed,  with  the  usual  consequences. 
Keene  v.  Beard,  8  C.  B.  n.  s.  372  ;  Shaw  v.  Jacobs,  89  Iowa,  713,  717  ;  Dop- 
pelt  V.  National  Bank,  175  111.  432  ;  Gaoe  Hotel  Co.  v.  Union  Bank,  171  111. 
531.  Thus,  temporarily,  a  cheque  may  be  ma<le  an  instrument  of  ciedit, 
without  certification. 

'  N.  I.  L.  §  38  :  'The  indorsement  must  be  written  on  the  instrument  it- 
self, or  upon  a  paper  attached  thereto.  The  signature  of  the  indorser,  without 
additional  words,  is  a  sufficient  indorsement.'  If  written  on  a  paper  annexed 
to  the  instrument,  such  paper  is  called  an  '  allonge.' 


84  BILLS,  NOTEy,  AND   CHEQUES.  [Chap.  VIIL 

drawing  of  a  bill  of  exchange  is,  for  the  purpose  now  in  hand, 
an  equivalent. 

It  has  indeed  been  said  that  an  unnegotiable  instrument  (a 
promissory  note)  may  be  indorsed  by  the  payee  so  as  to  create 
the  same  rights  and  duties  between  the  payee  and  the  '  indorsee ' 
as  if  the  instrument  were  negotiable.^  But  that  may  well  be 
doubted.  The  law  merchant,  by  which  alone  such  rights  and 
duties  are  created,  knows  nothing  of  indorsement  of  non-nego- 
tiable paper.  The  so-called  indorsement  if  followed  by  delivery 
would  pass  the  title  ;  but  it  would  pass  the  title  as  of  the  com- 
mon law,  and  nothing  more,  apart  from  statute  or  special  agree- 
ment. In  other  words  it  would  merely  be  evidence  of  a  sale  and 
assignment  of  the  instrument.^ 

§  2.     Who  may  or  must  Indorse. 

Indorsement  may  be  made  by  the  holder  of  the  instrument,  or 
by  one  having  no  interest  in  it.  When  by  the  holder  indorse- 
ment is  an  order  upon  the  maker,  drawee,  or  acceptor  to  pay  the 
sum  named  to  the  next  holder  named,  or  to  his  order,  or  the 
bearer,  according  to  its  form,  and  has  therefore  a  similar  effect 
to  drawing  a  bill  of  exchange.  When  done  by  one  having  no 
interest  in  the  paper,  indorsement  merely  adds  security  to  the, 
instrument,  tvd  fi-w-t**  ^.-^  **^-^' «^**--  <3  ••  h^^^J^^^^r^,  ttuAi^ 
CP%  AA/^if^f'f^-^-J    trt-m^^r^  p^«^tjB.«l    Ui^«^«wu  jCiL  ^k««.«i*i^^^l*Z^rv. 

If  the  instrument  is  on  its  face,  or  by  indorsement,  payable  to 
order,  indorsement  by  the  holder  is  necessary  to  pass  the  title 
,    ,         ,        by  the  law  merchant ;  that  is,  to  give  to  the  next 

Instruments  •'  ... 

payable  to         holder  legal  ownership  and  a  corresponding  right 

of  action  upon  the  instrument.^     If  the  instrument 

is  on  its  face,  or  by  indorsement,  payable  to  bearer,  indorsement 

is  not  necessary  to  pass  the  title.     The  instrument  in  such  a 

'  Story,  Promissory  Notes,  §  128. 

2  There  appears  to  be  no  authority  for  the  statement  in  Story. 

*  The  maker  of  a  note  payable  to  his  own  order  must  himself  indorse  it,  to 
pass  the  title.  Ewan  i\  Brooks-Waterfield  Co.,  55  Ohio  St.  596.  But  the 
indorsement  will  not  affect  his  liability  as  maker.  Id.  An  instrument  pay- 
able to  ' order  '  may  be  indorsed,  so  as  to  pass  the  title,  by  the  maker  or 

drawer.     Chamberlain  v.  Young,  1893,  2  Q.  B.  206. 


Sect.  2.]  INDORSEE'S   CONTRACT.  8jj 

case  passes  by  delivery  ;  and  where  the  instrument  itself  is  pay- 
able to  bearer,  that  will  still  be  true  though  a  special  indorse- 
ment (as  '  Pay  to  the  order  of  A')  be  written  upon  it.  But  the 
special  indorser  will  be  liable  to  those  only  who  make  title 
through  his  indorsement.^  Unnecessary  indorsements  may  be 
struck  out.^  If  the  instrument  is  on  its  face  payable  to  a  persou 
named,  without  words  of  negotiability,  there  can  be  no  proper 
indorsement  of  it;  ^  but  if  on  its  face  there  are  words  of  negotia- 
bility, it  may  be  indorsed  after  an  indorsement  making  it  pay- 
able to  a  person  named,  without  addition  of  the  words  '  or  order  ' 
or  the  like. 

Where  indorsement  is  reqixired  to  pass  the  (legal)  title, 
transfer  without  indorsement,  though  with  full  intent  to  pass 
title,  is  no  more  than  an  assignment,  and  passes  only  an  equi- 
table title  to  the  instrument.*  Standing  on  such  a  title,  the 
new  holder  can  have  no  better  rights  than  the  person  from 
whom  he  took  the  paper.  For  example:  A  is^^gayee  of  .3  mite 
payable  to  his  order,  but  illegal  in  hiaJaands.  He  transfers  the 
paper  to  B  for  value  and  without  notice,  but  without  iudorae- 
aifijlJ;.     The  note  is  invalid  in  B's  hands. ^ 

By  the  law  merchant,  apart  from  statute,  indorsement  need 
not,  it  has  been  held,  be  in  the  name  of  the  indorser;  enough 

1  N.  I.  L.  §  47. 

'^  Id.  §  55  ;  Middleton  v.  Griffith,  57  N.  J.  442 ;  Diigan  v.  United  States, 
3  Wheat.  172. 

3  Ante,  p.  84. 

♦  So  of  an  assignment  in  fact,  by  separate  paper.  Gaylord  v.  Nebraskii 
Bank,  54  Neb.  104. 

5  Lancaster  Bank  v.  Taylor,  100  Mass.  18  ;  Goshen  Bank  v.  Bingham,  118 
N.  Y.  349;  Jenkinson  v.  Wilkinson,  110  N.  C.  532;  Slater  v.  Foster,  02 
Minn.  150 ;  Beard  v.  Dedolph,  29  Wis.  136  ;  N.  I.  L.  §  56.  But  if  the  omis- 
sion of  indorsement  was  due  to  mistake,  the  transferee  could  compel  indorse- 
ment by  suit  in  equity.  Brown  v.  McHugh,  35  Mich.  50,  52.  And  if  that 
proceeding  were  had  before  maturity  and  before  knowledge  of  the  invalidity  of 
the  paper,  the  result  would  be  to  give  the  transferee  a  perfect  title,  as  if  there 
had  been  an  indorsement  in  the  first  place.  Lancaster  Bank  v.  Taylor,  supra. 
After  maturity  it  would  be  too  late,  according  to  that  case,  and  also  according 
to  Whistler  v.  Forster,  14  C.  B.  n.  s.  248.  See  Goshen  Bank  v.  Bingham, 
supra,  and  note  to  N.  I.  L.  §  56.     But  see  Beard  v.  Dedolph,  supra. 


86 


BILLS,  NOTES,  AND   CHEQUES.  [Chap.  VUL 


that  it  is  his  act,  intended  as  indorsement.^  For  example :  The 
payee  of  a  bill  of  exchange  payable  to  his  order  writes  upon  the 
Name  of  ^^^^  '  ^)  2,  8,'  for  a  substitute  for  his  signature  as 

indorser.  indorser,  and  transfers  the  instrument  to  the  plain- 

tiff. The  act  is  held  to  be  indorsement,^  Again  :  The  wife  of 
tlie  payee  in  such  a  case,  acting  as  the  authorized  agent  of  the 
payee,  writes  her  own  name  upon  the  note.  That  is  deemed 
indorsement  by  the  payee. ^ 

When  indorsement  is  required,  in  order  to  pass  title,  the  act 
must  be  done  by  him  who  has  the  legal  title,  though  the  entire 
Holder  of  legal  beneficial  interest  be  in  another.*  Thus,  one  to 
tit  e  to  indorse.  ^,|^osg  order  as  trustee  a  promissory  note  is  payable 
must  indorse  it,  to  jiass  the  title  to  another;  indorsement  by  the 
cestui  que  trust  would  pass  the  equitable  title  only,  and  pay- 
ment could  not  be  enforced  in  favor  of  the  indorsee.  So  where 
paper  is  made  payable  to  A,  to  the  order  of  B,  the  meaning  is  that 
it  is  payable  to  A  only  upon  the  order  of  B;  hence,  B  must 
indorse  it  in  order  to  give  to  A  the  full  right  of  legal  owner- 
ship. Again,  upon  the  death  of  the  holder  of  paper  the  legal 
title  passes  to  his  executor  if  he  left  a  will,  or  to  his  adminis- 
trator if  he  died  intestate;  and  this  though  the  deceased  gave  the 

^  It  must  be  the  act  of  the  owner,  unless  it  is  an  accommodation  indorse- 
ment ;  indorsement  of  the  owner's  name  by  another  person  of  the  same  name, 
without  authority,  would  not  pass  the  title.  It  would  be  forgery.  Beattie  v. 
National  Bank,  174  111.  571 ;  Cochran  v.  Atchison,  27  Kans.  728. 

2  Brown  v.  Butchers'  Bank,  6  Hill,  443.  In  case  of  a  mistake  in  the  name 
or  spelling  of  the  name  of  the  payee  or  indorsee  such  person  may  indorse  in 
the  name  or  spelling  given,  and  add,  if  he  think  fit,  his  proper  signature. 
N.  I.  L.  §  50. 

3  Stevens  v.  Beals,  10  Cash.  291.  This  is  an  exception  to  the  fundamental 
rule  that  the  instrument  itself  should  disclose  the  parties  and  their  rights,  so 
that  external  evidence  need  not  be  resorted  to.  Such  indorsements  would 
certainly  be  contrary  to  the  custom,  and  in  sound  theory  should  be  good  only 
where  the  peculiar  indorsement  is  explained  on  the  instrument  itself.  The 
truth  appears  to  be  that  '  indorsements  '  like  those  of  the  text  have  been  inter- 
preted as  if  the  transaction  were  one  of  the  common  law,  an  essentially  un- 
sound view. 

"*  So  he  who  has  the  legal  title  is  the  person  to  sue  upon  the  instrument. 
Berneyu.  Steiner,  108  Ala.  111. 


Sect.  2.]  INDORSER'S   CONTRACT.  87 

pupcr  by  will  specifically  to  another.  Heuce,  the  executor  must 
indorse  it  to  pass  title,  if  it  is  payable  to  order,  to  give  the 
legatee  tlie  right  to  sue  upon  or  to  transfer  it.' 

'riiis  rule  finds  frequent  expression  in  cases  of  paper  payable 
or  indorsed  to  a  partnership.  The  legal  title  being  in  the 
partnership,  nothing  short  of  an  act  by  the  firm  (jases  of 
can  be  indorsement.  It  makes  no  difference  to  partnership, 
whom  the  paper  is  to  be  passed;  one  of  the  partners,  acting 
merely  in  his  own  right,  could  not  indorse  the  paper  even  to 
his  sole  co-partner.^  Of  course  the  partner  might  indorse  the 
paper  over  as  the  act  of  the  partnership;  and  it  would  perhaps 
make  no  difference  that  he  did  it  in  his  own  name,  if  the  act 
were  the  act  of  the  firm.^  Nor  would  the  act  be  ineffective 
because  the  instrument  was  indorsed  by  the  firm  over  to  one  of 
the  partners.  Such  indorsee  could  not,  indeed,  maintain  an 
action  upon  the  paper  against  the  partnership  ;  but  his  right  of 
action  would  be  perfect  against  other  parties.* 

Upon  the  death  of  a  member  of  the  partnership,  the  survivors 
may  indorse,  in  the  name  of  the  partnership,  paper  paj'able  or 
indorsed  to  the  firm.  The  survivors  acquired  by  survivorship 
full  and  complete  title  to  such  paper  for  the  purpose  of  settling 
the  affairs  of  the  now  dissolved  partnership,  and  hence,  for  in- 
dorsing over  the  paper;  the  proceeds  going  to  the  benefit  of  the 
estate  of  the  deceased  partner  to  the  extent  of  his  interest.^ 

A  different  rule  prevails,  it  seems,  in  those  cases  in  which 
indorsement  of  the  firm  paper  is  not  necessary  to  pass  title ; 
that  is,  where  the  paper  is  payable  to  bearer,  or  is  already  in- 
dorsed in  blank.  In  such  a  case  it  does  not  follow  that  because, 
by  the  articles  of  partnership  or  agreement  between  the  part- 

1  Crist  V.  Crist,  1  Cart.  (Ind.)  570.  See  also  Hersey  v.  Elliot,  67  Maine, 
626.     The  executor  or  administrator  will  indorse  '  without  recourse.' 

2  Estabrook  v.  Smith,  6  Gray,  ^uO  ;  Robb  v.  Bailey,  13  La.  An,  457. 
2  Estabrook  v.  Smith,  supra.     But  see  note  3,  supra,  p.  86. 

*  So  a  note  made  by  a  partnership  payable  to  the  order  of  one  of  the  part- 
ners may  be  indorsed  over  by  the  payee  so  as  to  give  a  good  title  to  his  in- 
dorsee.    Thayer  i;.  Buffum,  11  Met.  398. 

^  Story,  Promissory  Notes,  §  125 ;  Crawshay  v.  Collins,  15  Ves.  218, 
226;  Jones  V.  Thorn,  2  Mart.  N.  s.  463.  See  note  to  Gilmore  v.  Ham,  40  Am, 
St  Rep.  561-576 ;  1  Daniel,  Neg.  Inst.  370  et  seq. 


88  BILLS,  NOTES,  AND  CHEQUES.  [Cha^.  VriL 

ners,  partnership  paper  is  to  be  passed  only  by  the  partnership), 
the  partnership  indorsement  is  necessary  towards  third  persona, 
in  order  to  pass  the  legal  title.  No  indorsement  by  a  member 
of  the  partnership  in  his  own  personal  right  would  pass  title  in 
favor  of  a  person  haA'ing  notice  of  the  wrongful  act;  but  the 
instrument  itseK  might  not  carry  notice,  and  one  who  purchased 
for  value  and  without  notice  would  acquire  a  perfect  title. ^ 
And  upon  the  death  of  one  of  the  partners,  it  would  not  be 
necessary,  it  seems,  for  the  survivors  to  indorse  such  paper  over 
as  surviving  partners.^ 

There  is  much  doubt  whether  the  same  rule  would  apply  con- 
cerning such  cases  of  indorsement  where  the  firm  has  been  dis- 
solved, not  by  death,  but  by  the  act  of  the  parties,  or  by  the 
law.  There  are  authorities  which  deny  the  power  of  one  of  the 
partners  to  indorse  the  paper  over  in  such  a  case,^  even  though 
that  partner  have  authority  to  settle  up  the  partnership  busi- 
ness.* Perhaps  this  is  the  better  doctrine.  The  contrary 
would  be  true,  however,  if  the  indorsee  had  no  notice  of  the 
dissolution,^  or  if  the  paper  was  payable  or  indorsed  to  the 
particular  partner  (for  the  partnership)  who  after  dissolution 
indorsed  it.^ 

If  the  instrument  is  payable  either  on  its  face  or  by  indorse- 
ment to  two  or  more  persons  not  partners,  all  must  indorse  it, 
to  pass  the  title,  unless  one  has  authority  to  indorse  for  all.'^ 
In  the  latter  case  the  indorsement  ought  in  principle  to  be  in 
the  name  of  all. 

A  bill,  note,  or  cheque  payable  to  the  order  of  one  who  is 
Indorsement  named  on  the  instrument  as  agent  for  another  is 
by  agent.  payable  by  the  custom,  prima  facie,  to  his  princi- 

pal's order;  and  no  indorsement  by  the  agent  is  needed  to  give 

^  That  is  because  no  indorsement  is  necessary,  in  the  case  put,  to  pass  tlio 
title.    Whether  indorsement  is  by  the  firm  or  not  is  immaterial,  in  such  a  case. 
2  Attwood  V.  Rattenbury,  6  J.  B.  Moore,  579. 
8  Sanford  v.  Nickles,  4  Johns.  224  ;  Woodson  v.  Wood,  84  Va.  478. 

*  Abel  V.  Sutton,  3  Esp.  108  ;  Humphries  v.  Chastain,  5  Ga.  166  ;  Folt» 
r.  Pourie,  2  Desaus.  Eq.  40. 

6  Cony  V.  Wheelock,  33  Maine,  366.  ;• 

•  Temple  v.  Seaver,  11  Cush.  314.  '  N.  I.  L.  §  48. 


Sect.  3]  INDORSEE'S   CONTRACT.  89 

the  principal  or  any  subsequent  holder  a  perfect  title.  So  if 
the  instrument  is  payable  or  indorsed  to  the  order  of  a  cashier 
or  other  fiscal  officer  of  a  bank,  it  is  by  the  custom  payable  to 
the  order  of  the  bank  itself,  and  may  be  indorsed  accordingly. 
For  example :  A  promissory  note  is  payable  to  the  order  of  '  A, 
Cashier  '  of  a  bank.  The  note  is  payable  to  the  order  of  the  bank, 
and  the  cashier's  indorsement  is  not  necessary  to  pass  the  title. ^ 
The  rule  has  been  extended  by  the  Statute  to  instruments  pay- 
able or  indorsed  to  the  order  of  any  corporation.  But  such 
agent  may  still  indorse  for  his  principal.^ 

§  3.     Partial  Indorsement. 

Again  there  can  be  no  transfer,  according  to  the  law  mer- 
chant, that  is  with  all  the  consequences  of  that  law,  by  indorse- 
ment which  passes  less  than  the  entire  title  to  the  paper,^  where 
indorsement  is  necessary  to  pass  title.  For  example:  A  makes 
a  promissory  note  for  $500,  payable  to  the  order  of  B.  B 
writes  thereon  '  Pay  $400  of  this  note  to  C  or  order, '  and 
signs  the  direction.  C  cannot  maintain  an  action  against  A 
on  the  note  even  to  recover  $400.*  Nor  could  C  sue  B  on  his 
'  indorsement.'  ® 

Part  interest  in  the  paper  could  no  doubt  be  transferred, 
because  alienation  is  an  incident  of  property;  but  the  transfer 
would  be  in  virtue  of  the  common  law,  and  the  partial  indorse- 
rights  of  the  parties  in  respect  of  the  transaction  ™ent. 
would  be  rights  of  the  common  law,  not  of  the  law  merchant. 
The  law  merchant  knows  nothing  of  such  transactions.^     Sev- 

1  First  National  Bank  v.  Hall,  44  N.  Y.  395  ;  Lookout  Bank  v.  Aull,  93 
Tenn.  645. 

2  N.  I.  L.  §  49  ;  '  "When  an  instrument  is  drawn  or  indorsed  to  a  person 
as  cashier  or  other  fiscal  officer  of  a  bank  or  corporation,  it  is  deemed  prima 
facie  to  be  payable  to  the  bank  or  corporation  of  which  he  is  such  officer,  and 
may  be  negotiated  by  either  the  indorsement  of  the  bank  or  corporation  or  the 
indorsement  of  the  officer.'  See  Falk  v.  Moebs,  127  U.  S.  597.  But  as  to  this 
case  see  Hately  v.  Pike,  162  111.  241,  245. 

3  N.  I.  L.  §  39.  *  Lindsay  v.  Price,  33  Texas,  282- 
6  Douglass  r.  Wilkeson,  6  Wend.  637. 

8  But  see  Citizens'  Bank  v.  Walton,  31  S.  E.  Rep.  (Va.)  890,  and  qu.  There 
may,  as  we  have  seen,  be  acceptance  for  part  of  a  bill  of  exchange.     And  there 


90  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  VIII 

eral  joint  indorsers  might  however,  in  indorsing  the  entire 
interest,  designate  between  themselves,  on  the  instrument, 
their  particular  shares  of  the  burden,  for  the  act  would  not 
necessarilj''  cut  down  the  right  of  the  indorsee.  And  perhaps 
an  accommodation  indorser  might  indorse  for  part  of  the  sum, 
since  such  an  indorser  is  not  owner  of  the  instrument  and  his 
indorsement  therefore  is  not  necessary  to  pass  title. 

§  4.     Modes  of  Indorsement. 

Indorsement  is  a  technical  act  by  the  law  merchant,  and  can 
be  effected  only  in  certain  ways.  In  the  first  place  the  act. 
Indorsement  as  the  definition  states,  must  be  in  writing;  in  the 
cordin"-  to  k'w  second  place  it  must  be  according  to  the  law  mer- 
merchant.  chant.     The  first  of  these  rules,  as  well  as  the  sec- 

ond, is  a  requirement  of  the  law  merchant,  not  originally  of 
any  statute.  In  regard  to  the  second,  the  act  is  according  to 
the  law  merchant,  as  declared  in  the  Statute,  when  the  indorse- 
ment is  special  or  in  blank,  or  when  it  is  restrictive,  qualified, 
or  conditional.^ 

Indorsement  is  special,  according  to  the  Statute,  when  it 
specifies  the  person  to  whom  or  to  whose  order  the  sum  named 
Special  ^^  payable;   it  is  in  blank  when  it  does  not.^     The 

indorsement.  distinction  between  these  two  in  substance,  as  has 
already  been  seen,  is  that,  after  special  indorsement,  indorse- 
ment by  the  person  named  thereby  is  necessary  to  pass  the  title 
to  the  instrument;  while  after  indorsement  in  blank  further  in- 
dorsement is  unnecessary,  the  instrument  passing  by  delivery." 

The   holder   has    the    right   fa   fi()T!Yfir^  «  blank    iTiflnr>;pmpnt    infn 

*a  special  one  by  writing  over  the  signature  of  £La— LiuLarsfir  ir\ 
blank  a  proper  direction  for  paympnt.  to  himsftlf  or  to  himself  or 
jorder.*_ 

is  some  semblance  of  authority  for  the  opinion  that,  before  acceptance,  there 
may  be  an  indorsement  as  to  part  of  the  sum  named.  See  Pownal  v.  Ferrand, 
6  Barn.  &  C.  439  ;  Beawes,  pi.  286.  But  the  better  view  is  contra.  Chitty, 
Bills,  235,  note.  See  also  the  remark  of  Parke,  B.,  on  the  argument  in  Oridge 
•.  Sherborne,  11  Mees.  &.  W.  374. 

1  N.  I.  L.  §  40. 

»  Id.  §  41.  «  Id.  *  Id.  §  42. 


SiKjT.  4.]  INDORSEE'S   CONTRACT.  91 

Indorsement  is  restrictive,  according  to  the  Statute,  (1)  when 
it  prohibits  the  further  negotiation  of  the  instrument,  as  where 
it  reads  '  Pay  to  A  only, '  (2)  when  it  constitutes  Restrictive 
the  indorsee  agent  of  the  indorser,  as  where  it  int»orsement. 
reads  '  For  collection,'  or  (3)  when  it  vests  the  title  in  the  in- 
dorsee in  trust  for  or  to  the  use  of  another.^  The  restrictive 
indorsee  has  the  right  to  receive  payment  of  the  instrument,  to 
hring  any  action  upon  it  which  the  indorser  could  bring,  and 
ta  transfer  his  rights  as  such  indorsee  consistently  with  the 
instrument.'^ 

Indorsement,  by  the  Statute,  is  qualified  when  it  constitutes 
the  indorser  a  mere  assignor  of  the  instrument,  as  where  he 
adds  to  or  writes  before  his  signature  the  words  '  without  re- 
course.'^ The  negotiable  character  of  the  instrument  is  not 
affected  by  such  an  indorsement.* 

Indorsement  is  conditional,  within  the  meaning  of  the  Stat- 
ute as  it  seems,  whenever  it  is  accompanied  by  written  words 
of  lawful  condition  other  than  those  imported  of  conditional 
indorsement  by  the  law  merchant.  Conditional  'ndorsement. 
indorsement,  in  other  words,  makes  or  may  make  a  double  con- 
dition or  set  of  conditions,  to  wit,  those  of  the  law  merchant  (if 
these  are  not  affected  by  the  indorsement),  and  the  special  added 
condition.  Such  indorsement  does  not  affect  the  negotiable 
properties  of  the  instrument  itself;  ^  it  affects  simply  the  rights 
aijd  liabilities  of  the  conditional  indorser,  according  to  the 
tenor  of  the  condition,  whether  relating  to  title  or  to  liability.* 

1  N.  I.  L.  §  43. 

2  Id.  §  44.  Subsequent  indorsees  acquire  only  the  title  of  the  first  in- 
dorsee under  the  restrictive  indorsement.  Id.  If  the  instrument  in  origin  is 
negotiable,  it  continues  so  until  restrictively  indorsed  or  discharged.  Id. 
§54. 

8  Corbett  v.  Fetzer,  47  Neb.  269.  Where  the  words  follow  the  signature 
and  then  there  is  another  indorsement,  it  may  be  shown  by  evidence  to 
which  indorsement  the  words  belong.  Id.  It  matters  not  that  the  holder 
thought  that  they  belonged  to  the  second  indorsement  if  they  did  not.     Id. 

♦  N.  I.  L.  §  45. 

6  Tappan  v.  Ely,  15  Wend.  362. 

•  The  holder  can  strike  out  or  disregard  the  conditional  indorsement  where 


92  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  VIIl 

Indorsement  may  on  the  other  hand,  by  waiving  any  or  all 
Waiver  of  ^^^  steps  otherwise  necessary  to  fix  the  iudorser's 

^^^P^-  liability,  enlarge  the  holder's  rights. 

Any  indorsement  may  be  made  by  two  or  more  persons  jointly, 
as  where  the  indorsement  is  by  partners,  or  where  it  is  by 
Joint  several  persons  united  in  interest  in  the  transac- 

indorsement.  tion.  It  will  not  make  an  indorsement  by  two 
or  more  a  joint  indorsement  that  they  indorse  at  the  same 
time,  though  they  may  have  been  led  to  do  so  by  the  same  in- 
ducement; their  interest  in  the  transaction  must  be  joint, — 
they  must  have  undertaken  to  share  the  contract  together,^ 
which  may  be  shown  to  be  the  fact."^  When  such  is  the  case 
they  are,  notwithstanding  their  individual  indorsements,  all 
joint  indorsers  towards  the  holder,  their  own  indorsee,  though 
not  to  subsequent  holders  in  due  course.  Between  themselves, 
however,  they  are  not  indorsers  at  all;  that  is,  one  of  them 
could  not  maintain  an  action  against  one  of  his  associates  as  an 
indorser,^  nor  indeed  could  one  without  his  associates,  after 
taking  up  the  paper,  maintain  an  action  against  any  party 
to  it.* 

As  has  been  said  already,  indorsement  is  an  act  of  the  law 
merchant,  to  be  done  according  to  the  law  merchant.  Whether 
Conformity  to  a  particular  act  is  according  to  the  law  merchant 
law  merchant,  gi^^^i^j^  j^  seems,  be  determined  by  the  question  of 
its  conformity  to  the  custom.  What  the  custom  is  may  be  in- 
ferred from  what  has  been  stated.     To  write  one's  name  simply 

his  title  does  not  depend  upon  it,  and  sue  the  other  parties  accordingly.  See 
N.  L  L.  §  46. 

1  Shaw  V.  Knox,  98  Mass.  214;  Hogue  v.  Davis,  8  Gratt.  4.  Successive 
indorsers  for  accommodation  of  another  are  presumptively  liable  in  the  order 
of  their  indorsement.  Shaw  v.  Knox,  supra ;  Moore  v.  Gushing,  162  Mass. 
594. 

2  Harrah  v.  Doherty,  111  Mich.  175. 

3  Shaw  V.  Knox,  supra. 

*  Under  the  Statute  joint  payees  or  joint  indorsees  who  indorse  are  deemed 
to  indorse  jointly  and  severally  (that  is,  towards  subseq^uent  holders).  N.  L 
L.  §75. 


Sect.  4.]  INDORSEE'S  CONTRACT.  93 

upon  the  instrument;  or  in  connection  witli  it  to  write  'Pay  to 
A  or  order,'  or  the  like,  or  '  Pay  to  A  only,'  or  'for  collection, 
or  'in  trust,'  or  'without  recourse,'  or  'upon  condition,'  nam- 
ing the  condition,  or  '  waiving  demand '  or  '  demand  and  notice,' 
or  'protest,'  or  the  like;  such  would  be  according  to  the  law 
merchant,  because  they  are  of  custom. 

Material  departures  from  the  custom  should  not,  in  sound 
theory,  be  admitted  to  the  footing  of  indorsement,  but  should 
stand  upon  their  own  footing  according  to  their  terms.  In 
other  words  the  common  law  or  equity,  according  to  the  case, 
and  not  the  law  merchant,  should  be  applied  to  the  rights  and 
liabilities  of  the  parties  to  such  transactions.  This  doctrine 
however  has  sometimes  been  overlooked,  and  transactions  in 
terms  which,  apart  from  their  connection  with  instruments  of 
the  law  merchant,  would  be  governed  by  principles  of  the  com- 
mon law  or  of  equity,  have  been  treated  as  indorsement  within 
the  law  merchant. 

Some  authorities  appear  indeed  to  have  gone  the  length  of 
declaring  that  any  writing  by  the  holder  of  a  negotiable  instru- 
ment, which  purports  to  transfer  his  title  thereto  irretmlar 
may  be  construed  to  mean  indorsement.  For  ex-  indorsement, 
ample :  The  holder  of  a  negotiable  note  writes  on  the  back  of  it, 
'I  this  day  sold  and  delivered  to  A  the  within  note,'  or  'I 
hereby  sell  and  assign  all  my  right  and  title  to  this  note,' 
adding  his  signature.  This  has  been  deemed  indorsement 
according  to  the  law  merchant.^  Again :  In  like  case  the 
writing  is,  'I  hereby  guaranty  the  payment  of  this  note.' 
This  too  has  been  treated  as  indorsement.^  Again:  The  de- 
fendant writes  on  the  back  of  a  negotiable  note  an  agreement 
by  himself  to  pay  the  note  'as  if  by  me  indorsed.'  This  has 
(perhaps  with  better  reason)  been  held  indorsement' 

1  Adams  v.  Blethen,  66  Maine,  19  ;  Markey  v.  Corey,  108  Mich.  184 ;  s.  c. 
36  L.  R.  A.  117;  Sears  v.  Lantz,  47  Iowa,  658  ;  Merrill  v.  Hurley,  55  Am. 
St.  Rep.  859,  866  ;  Hatch  v.  Barrett,  34  Kans.  230. 

2  Partridge  v.  Davis,  20  Vt.  499.  See  Tuttle  v.  Bartholomew,  12  Met. 
452,  referring  to  various  cases  so  holding  and  rightly  repudiating  them.  See 
also  Belcher  v.  Smith,  7  Cush.  482. 

8  Pinnes  v.  Ely,  4  McLean,  173. 

3  ci.£.R.  3Ct| 


94  BILLS,  NOTES,  AND   CHEQUES.  [Chaf.  VIII. 

Such  doctrine  may  well  be  doubted;  to  sell  and  deliver  is  not 
to  indorse  according  to  the  law  merchant,  nor  does  the  act  be- 
come indorsement  bj'  the  fact  that  it  is  evidenced  by  writing 
and  signature  upon  a  negotiable  instrument.  The  owner  of  a 
non-negotiable  instrument  might  '  sell  and  deliver '  it,  and  note 
the  fact  by  writing  and  signature  on  the  instrument ;  but  the 
act,  though  of  the  same  nature  as  in  the  case  in  question, 
would  not  be  indorsement.^  So  to  'sell  and  assign'  is  not  to 
indorse,  though  written  and  signed  by  the  owner  of  a  negotiar- 
ble  note.  If  done  upon  a  separate  instrument,  it  clearly  would 
be  nothing  more  than  a  transfer  of  title,  legal  or  equitable 
according  to  circumstances ;  ^  and  it  could  not  be  more  by 
attaching  such  instrument  to  the  note  or  by  writing  the  words 
upon  the  note.  The  distinction  between  assignment  and  in- 
dorsement is  plain  enough.  And  so  of  writing  a  guaranty  upon 
the  instrument;  guaranty  is  a  very  different  undertaking  from 
indorsement,  and  might  of  course  be  added  to  an  indorsement 
proper,*  as  often  is  done. 
^  Criticism  of  the   doctrine    mentioned   must   not   however   be 

considered  as  suggesting  that  there  is  no  place  for  constructiou 
Construction  or  interpretation  of  the  language  used.  It  may 
of  language.  ^g]|  j^g  ^hat  words  may  be  used  not  in  strict  con- 
formity to  usage  but  still  as  bearing  the  import  of  indorsement 
according  to  the  law  merchant;  in  such  a  case  the  words  must 
be  interpreted  accordingly.  But  if  the  words  do  not  import  a 
special  or  blank  indorsement,  or  a  restrictive,  qualified,  or  con- 
ditional indorsement,  as  those  terms  have  been  explained,  they 
should  not  be  taken  to  import  indorsement  according  to  the  law- 
merchant.  For  example:  Above  the  defendant's  signature,  on 
the  back  of  a  negotiable  promissory  note,  is  written,  '  Rec'd  one 
year's  interest  on  the  within,  May  10,  1871.'  This  imports, 
not  indorsement  according  to  the  law  merchant,  but  only  ac- 
knowledgment of   interest  paid:  and  the   defendant  cannot   be 

1  Merchants'  Bank  v.  Gregg,  107  Mich.  146;  Story  t-.  Lamb,  52  Mich. 
525.  But  the  courts  of  Michigan  distinguish  the  two  cases.  Markey  v. 
Corey,  supra. 

*  Gaylord  v.  Nebraska  Bank,  54  Neb.  104. 

3  See  Elgin  Banking  Co.  v.  Zelch,  57  Maine,  487. 


Sect.  5.]  INDORSEE'S  CONTRACT.  95 

held  as  indorser  without  evidence  showing  that  his  signature 
has  no  connection,  or  not  the  connection  it  appears  to  have,  with 
the  words  of  receipt  quoted.' 

§  5.     Indorsement  as  an  Order  of  Payment. 

When  indorsement  is  made  by  the  holder  of  the  instrument, 
^  ^5lti/fgli/^^d'  ^^  o/j^  yiyi  in^or/es/for  /cco^nqj5da)rig^  the 
act  is  an  order  upon  the  maker,  acceptor,  or  drawee  ,„,      .  _, 

'-  .  .  When  indorse- 

to  pay  the  sum  named  to  a  designated  indorsee,  or  ment  an  order 

to  his  order,  or  to  bearer,  according  to  the  nature 

of  the  indorsement.     If  the  indorsement  is  special,  such  order 

appears  in   terms  upon  the    instrument;   if  it  is   in  blank,  the 

order  is  the  legal  effect  of  the  indorsement. 

It  is  often  stated  as  an  inference  that  indorsement  by  the 
holder  is  equivalent  to  drawing  a  bill  of  exchange  for  the  amount 
named  in  the  instrument  indorsed.  Such  statements  however 
should  be  taken  only  as  a  free  expression  of  a  general  truth. 
To  put  the  matter  accurately,  it  should  rather  be  said  that  in- 
dorsement is  equivalent  to  drawing  a  bill  or  to  drawing  a  cheque, 
according  to  circumstances.  The  indorsement  of  a  cheque  can- 
not properly  be  said  to  be  equivalent  to  drawing  a  bill;  for  the 
question  would  arise  at  once,  if  the  statement  were  made  with 
full  purpose.  What  kind  of  bill,  a  foreign  or  an  inland  bill  ? 
The  difference  is  material.  Dishonored  indorsement  of  a  cheque 
does  not  require  protest  to  fix  the  indorser's  liability;  while  the 
contrary  is  true  of  fixing  the  liability  of  the  drawer  of  a  dis- 
honored foreign  bill. 

It  may  be  said,  however,  that  indorsement  is  equivalent  to 
drawing  an  inland  bill;  but  why  that  rather  than  equivalent  to 
drawing  a  foreign  bill,  —  that  is,  why  that,  so  far  as  the  nature 
of  indorsement  is  concerned,  especially  in  a  case  in  which  the 
cheque  or  the  note  is  drawn  or  made  and  payable  in  different 
States  ?  And  then  in  regard  to  indorsement  of  a  bill  of  ex- 
change, could  it  be  said  that  indorsement  of  a  foreign  bill  was 
equivalent  to  drawing  an  inland  bill  ?  That  again  would  be 
to  change  the  nature  of  the  instrument. 

1  Clark  V.  Whiting,  45  Conn.  149. 


96  BILLS,  NOTES,  AND   CHEQUES,  [Chap.  VIIL 

Tliis  shows  tliat  so  far  as  there  is  any  equivalency,  the 
equivalency  must  have  relation  to  the  particular  instrument,  — 
indorsement  of  a  foreign  bill  to  the  drawing  of  a  foreign  bill,  in- 
dorsement of  an  inland  bill  to  the  drawing  of  an  inland  bill, 
indorsement  of  a  cheque  to  the  drawing  of  a  cheque,  indorse- 
ment of  a  promissory  note  to  the  drawing  of  an  inland  bill. 

At  best  the  equivalency  is  only  for  certain  purposes;  in  no 
case  is  indorsement  equivalent  to  the  drawing  of  a  bill  for  any 
of  the  special  purposes  considered  in  Chapter  VII.,  such,  for 
instance,  as  in  regard  to  the  rule  of  drawing  without  funds. 
Another  important  particular  in  which  there  is  no  equivalency 
will  be  noticed  by  referring  to  certain  remarks  on  a  preceding 
page  concerning  special  indorsement;  where  it  was  seen  that 
indorsement  by  such  words  as  '  Pay  to  A '  would  not  cut  off 
negotiability,  whereas  a  bill  so  drawn  would  not  be  negotiable. 

Indeed,  the  statement  that  indorsement  is  equivalent  to 
drawing  a  bill  is  misleading  in  many  cases,  and  necessary  in 
none.  It  would  have  been  better  to  say  that  indorsement  is  an 
order  on  the  drawee,  acceptor,  or  maker  to  pay,  according  to  the 
tenor  of  the  instrument.  That  would  be  strictly  true.  But 
the  statement  under  consideration  is  too  well  fixed  in  the  lan- 
guage of  the  law-books  to  be  discarded;  hence,  as  we  must  have 
it,  it  must  be  explained. 

§  6.     Order  of  Liability. 

The  holder  of  an  instrument  bearing  several   indorsements 

made  before  he  acquired  title  has  the  right  presumptively  to 

sue  the  indorsers  Cwhose  liability  has  been  fijced) 
Presumptive        ,  ^  i      i       •      •     i 

order:  who        in  any  order  he  pleases  and  obtain  judgments  ac- 

™^^      ^"    ■      cordingly,  until  he  has  received  satisfaction.     He 

is  not  bound  to  sue  the  last  indorser.     Between  the  indorsers 

themselves  the  order   of  liability  runs   back  towards  the    party 

primarily  liable,  and  never  in  the  opposite  direction.     But  any 

indorser  prior   in  time  to  the   indorser  who,  having  taken   up 

the  paper,  is  now  suing  upon  it,  may  be  sued.     Such  indorser 

is  no  more  required  to  sue  the  last  prior  indorser  than  is  the 

holder  at  the  end  of  the  indorsements. 


Sect.  7.]  INDORSER'S   CONTRACT.  97 

The  order  of  time  of  the  indorsements  is  presumptively  that 

of  the  succession  of  the  signatures  upon   the   instrument;  the 

drawer  in  the  case  of  a  bill  of  exchange  or  a  cheque   „   ,      ,  . 

®  1        Order  of  time  : 

being   treated  as    a   first  indorser.     But    the  pre-  order  of  names 
, .         „  , ,  .  p      •         .  •  .    not  conclusive, 

sumption  from  the  succession  of  signatures  is  not 

conclusive;  and  evidence  is  admissible  between  the  parties  to 

the  transaction  to  show  the  actual  order  of  liability,  whether  by 

showing  that  a  prior  signature  in  the  written  succession  was  in 

fact  later  than  one  or  more  following  it,  or  by  showing  some 

special  agreement  between  the  indorsers.^ 


(^ 


§  7.  )  Natttrk  of  t"^  rwjT?  A  f'j^ 

The  contract  unmodified  of  tneindorser  of  an  inland  bill  of 
k  exchange,  or  of  a  promissory  notp,  or  of  a  cheque,  is  that  he  will        -*-  f^^ 
pay  to  the  holder  the  sum  named  in  the  paper  upon  the  follow-  Atj^^^gTDi 
ing  conditions  precedent,  where  presentment  is   for  payment : /7T|r^  /tee 
(1)    Due  presentment  and  demand;  (2)  Due  notice  of  dishonor, <;T4». 
Of  a   foreign  bill   of  exchange:   (1)  Due  presentment  and  de- 
mand;  (2)  Due  protest;   (3)  Due  notice  of  dishonor. 

Where  presentment  of  a  bill  of  exchange  is  for  acceptance,  and 
acceptance  is  necessary,  the  contract  of  an  indorser  of  an  inland 
bill  is  for  payment  upon  the  following  conditions  precedent: 
(1)  Due  presentment  and  demand;  (2)  Due  notice  of  dishonor. 
Of  a  foreign  bill:  (1)  Due  presentment  and  demand;  (2)  Due 
protest;  (3)  Due  notice  of  dishonor.  Where  acceptance  is  not 
necessary,  then,  in  case  of  due  presentment  for  acceptance,  — 
of  an  inland  bill,  due  notice  of  dishonor;  of  a  foreign  bill,  due 
protest  and  due  notice  of  dishonor.^ 

All  this  leads  to  a  consideration  of  the  steps  necessary  to  fix  I 

1  Bank  v.  Layne,  101  Tenn.  45  ;  Morrison  Lumber  Co.  v.  Lookout  Moun- 
tain Hotel  Co.,  92  Tenn.  6;  Blackmore  v.  Gran  berg,  98  Tenn.  277;  Moore 
V.  Gushing,  162  Mass.  594  ;  Ewan  v.  Brooks-Waterfield  Co.,  55  Ohio  St.  596; 
Castle  V.  Rickey,  44  Ohio  St.  490.     See  N.  L  L.  §  75. 

2  On  the  nature  of  the  contract  of  anomalous  indorsement,  .see  ante,  p.  46. 
Where  the  holder  of  a  bill  of  exchange  drawn  in  a  set  indorses  two  or  more 

of  the  parts  to  different  persons,  he  is  liable  on  every  such  part,  and  every 
indorser  subsequent  to  him  is  liable  on  the  part  he  has  himself  indorsed  as  if 
such  parts  were  separate  bills.     N.  L  L.  §  187. 

7 


98  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  Vllt 

the  indorser's  liability,  transforming  it  from  a  conditional  to  an 
absolute  obligation.  But  there  is  another  subject  which  may 
properly  be  disposed  of  first. 

§  8.     Incidents  of  the  Contract. 

As  the  indorser  undertakes  to  pay  on  j)erformance  of  the  con- 
ditions precedent  named  in  the  last  section,  it  follows  that  in 
Proof  of  prior  ^^  action  against  an  indorser  it  is  not  necessary  for 
signatures:  ^^^  plaintiff  to  prove  the  genuineness  of  prior 
genuineness.  signatures,  or  of  the  promise  or  order  itself  which 
he  has  indorsed,  or  the  existence,  capacity,  or  authority  of  the 
prior  parties  to  contract.  It  was  usual  in  former  times  to  say, 
accordingly,  that  the  indorser  by  his  indorsement  admitted  such 
genuineness,  existence,  capacity,  and  authority;  ^  the  admission 
being  conclusive  m  favor  of  a  holder  of  the  instrument  in  due 
course.  And  that  is  still  the  rule  in  England,  under  the 
Statute,   so  far  as  the  Statute  goes.'^ 

But  without  authority  of  any  custom  it  has  for  a  long  time 
Warranty  of  come  to  be  common  for  courts  to  say  that  indorse- 
etc""'"he^^^'  naent  is  a  ivaranty  of  the  supposed  facts,  genuine- 
Statute,  ness,  existence  of  the  parties,  and  their  capacity 
and  authority  to  contract  as  they  appear  to  have  done.*     Obvi- 

-  1  See  amont;  other  cases  State  Bank  v.  Fearing,  16  Pick.  533  ;  Glidden  v. 
Chamberlain,  167  Mass.  486,  494;  Coggill  v.  American  Bank,  1  Comst.  113  ; 
Bank  of  Commerce  v.  Union  Bank,  3  Comst,  230  ;  Braithwaite  v.  Gardiner, 
8  Q.  B.  473;  Smith  v.  Marsack,  6  C.  B.  486;  Barlow  v.  Bishop,  1  East,  432. 

2  Bills  of  Exchange  Act,  §  55,  (2)  :  'The  indorser  ...  is  precluded  from 
denj'ing  to  a  holder  in  due  course  the  genuineness  and  regularity  iu  all 
respects  of  the  drawer's  signature  and  all  previous  indorsements '  ;  also  '  from 
denying  .  .  .  that  the  bill  [or  other  in.strument]  was  at  the  time  of  his  in- 
dorsement a  valid  subsisting  bill,  and  that  he  had  then  a  good  title  to  it.' 
The  drawer  of  a  bill  '  is  precluded  from  denying  to  a  holder  in  due  course  the 
existence  of  the  payee  and  his  then  capacity  to  indorse.'     Id.  §  55,  (1). 

3  Dale  V.  Gear,  38  Conn.  15  ;  Willis  v.  French,  84  Maine,  593  ;  Prescott 
Bank  v.  Butler,  157  Mass.  548,  550  ;  Erwin  v.  Downs,  15  N.  Y.  575;  Lennon 
V.  Grauer,  159  N.  Y.  433  (indorsement  contracts  for  genuineness)  ;  Crosby  v. 
Wright,  70  Minn.  251  ;  McKleroy  v.  Southern  Bank,  14  La.  An.  458;  Bir- 
mingham Bank  v.  Bradley,  103  Ala.  109.  See  also  First  National  Bank  v.  First 
National  Bank,  58  Ohio  St.  207  ;  Mechanics'  Bank  v.  Valley  Packing  Co..  70 
Mo.  200;  Northwestern  Bank  v.  Bank  of  Commerce,  107  Mo.  402. 


Sect.  8.]  INDORSEE'S   CONTRACT.  90 

ously  this  is  not  a  necessary  result  of  the  indorser's  conditional 
undertaking  to  pay;  and,  in  the  absence  of  plain  public  policy 
calling  for  it,  the  existence  of  such  a  warranty,  taking  the  won! 
in  its  ordinary  sense,  should  depend  upon  the  custom.  The 
judicial  dicta  (and  generally  the  language  of  the  courts  in  the 
matter  is  nothing  more)  have  however  become  so  common  as  tt> 
create  the  belief  that  warranty  is  an  incident  of  indorsement; 
»nd  the  Statute  at  last  has  confirmed  the  belief  and  turned  a 
number  of  loose  and  unnecessary  dicta  into  law,'  while  at  the 
same  time  it  follows  the  custom  in  regard  to  the  incidents  of 
the  contracts  of  the  drawer  and  of  the  acceptor,  treating  their 
acts  as  admissions  merely.'^ 

The  Statute  accordingly'  declares  that  indorsement  without 
(pialification  '  warrants  '  in  favor  of  subsequent  holders  in  due 
course  that  the  instrument  is  genuine,  and  in  all  respects  what 
it  purports  to  be ;  that  the  indorser  has  a  good  title  to  it ;  that 
all  prior  parties  had  capacity  to  contract ;  and  that  the  instru- 
ment at  the  time  of  indorsement  was  valid  and  subsisting;  — all 
this  '  in  addition  '  to  the  undertaking  of  indorsement  of  its  own 
inherent  force  according  to  the  law  merchant.^ 

It  is  not  quite  clear  however  whether  the  Statute  uses  the 
word  '  warrants '  in  its  proper  legal  sense,  or  in  some  secondary 
sense  which  would  make  it  mean  that  indorsement  ,  ■  ,     r 

Uncertainty  ot 

is  a  conclusive  admission  of  the  things  named,  in  the  Statute : 
favor  of  holders  in  due  course.  If  that  be  its 
meaning,  the  only  criticism  to  be  made  is  that  it  does  not  say 
so,  and  hence  perpetuates  instead  of  removing  a  doubt.  But 
the  fact  that  the  American  Statute  departs,  at  this  point,  from 
the  English  Statute,  on  which  it  is  based,  which  indeed  it 
generally  follows  ipsissimis  verbis,  and  that  it  makes  a  dis- 
tinction in  terms  between  the  incidents  of  indorsement  and 
those  of  drawing  and   accepting,  leads  to  the  inference  that  the 

1  N.  I.  L.  §  73.  That  the  language  of  warranty  is  loosely  used  in  the  cases 
is  seen  by  the  fact  that  courts  of  the  same  State  speak  of  the  act  now  as  an 
iiduiission,  now  as  a  warranty.  See  Glidden  v.  Chamberlain,  167  Mass.  480, 
494  ('admits')  ;  Prescott  Bank  v.  Butler,  157  Mass.  548,  550  (' warranto '). 

9  Id.  §§  68,  69.  3  Id.  §  73. 


100  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  VIII 

word  ('  warrants  ')  is  used  In  its  primary  sense.  Something 
certainly  is  meant  beyond  indorsement  according  to  the  legal 
import  of  that  act,  for  the  indorser  'warrants/  'and  in  addi- 
tion he  engages,'  etc. 

Assuming  that  the  word  is  used  in  its  proper  legal  sense, 
some  difficulties  cannot  escape  notice.  The  '  warranty,'  if 
broken  at  all,  is  broken  when  made;  for  in  the  case  supposed 
some  prior  indorsement  for  instance  was  not  genuine,  or  some 
prior  party  was  not  competent  to  contract.  Is  there  then  a  right 
of  action  by  reason  of  the  breach  of  warranty  regardless  of  the 
fact  that  payment  of  the  instrument  may  not  be  due  at  the 
time,  and  hence  without  the  steps  (presumptively)  required 
for  fixing  the  indorser's  liability  ?  What  does  '  in  addition ' 
mean  ?  Do  the  words  mean  that  there  are  two  separate  and 
distinct  contracts  ?  That  would  be  their  natural  meaning,  and 
if  that  is  their  real  meaning  then  the  indorser  becomes  liable 
absolutely  for  breach  of  warranty,  or  conditionally  upon  his 
indorsement,  at  the  holder's  election.  But  it  is  hard  to  believe 
that  an  innocent  indorser  can  be  held  to  pay  where  the  steps 
prescribed  by  the  law  merchant  have  not  been  taken.^  Perhaps 
the  way  out  of  the  difficulty  is  to  construe  the  words  '  in  addi- 
tion '  (with  what  follows)  as  a  proviso  in  regard  to  the  indorser's 
liability  for  breach  of  the  warranty;  thus  making  him  liable  on 
his  warranty  only  after  the  ordinary  steps  for  fixing  his  liability 
as  an  indorser.  That  however  would  put  the  warranty,  so  far, 
virtually  to  silence. 

Whatever  be  the  meaning  of  the  Statute,  it  is  still  true  that  the 
indorser  cannot  allege  want  of  genuineness  or  capacity,  or  the 
What  remains  like,  of  prior  signatures  or  parties.  The  Statute 
•^^^""  certainly   has    not    cut   down  the   rule  of   the   un- 

written law  merchant.  The  rule  is  clear  to  the  extent  named. 
Por  example  :  The  defendant  is  indorser  and  the  plaintiff  in- 
dorsee in  due  course  of  a  promissory  note  payable  to  the  order 
of  A,  and  purporting  to  bear  A's  indorsement.  The  steps  for 
fixing  the   defendant's   liability   have  been  taken.     But  it    is 

1  This  might  of  course  be  after  the  indorser  had  been  discharged  from 
liability  by  omission  of  the  steps,  as  well  as  before  maturity. 


Sect.  8.]  INDORSEll'S   CONTRACT.  101 

conceded  by  the  plaintiff,  if  the  evidence  is  admissible  against 
him,  that  the  supposed  indorsement  by  A  is  a  forgery,  of  which 
however  both  parties  were  ignorant  at  the  time  of  the  defend- 
ant's indorsement.  The  evidence  is  not  admissible,  and  the 
defendant  is  liable  notwithstanding  the  forgery.^  Again;  The 
defendant  is  indorser  and  the  plaintiff  indorsee  in  due  course,  of 
a  promissory  note,  executed  by  a  person  incompetent  to  contract 
to  the  plaintiff's  knowledge  when  he  took  the  note.  The 
defendant's  liability  has  been  duly  fixed;  but  he  now  sets  up 
the  incapacity  of  the  maker.     That  is  no  defence.^ 

It    should   be    noticed  that   the   warranty   of   the  Statute   is 
made    negotiable,    like    the    indorsement    itself;     though    war- 
ranty, being  a  contract  of  the  common  law,  is  not  The  warranty 
naturally  negotiable.  is  negotiable. 

Another  question  of  a  kindred  nature  has  given  the  courts 
trouble  ;  to  wit,  Does  this  warranty  or  admission  by  the  indorser 
of  the  validity  of  the  paper  as  it  stands  disqualify  Competency  of 

such  indorser  to  give  testimony  to  the  invalidity  of  indorser  to 
"  ''  •'  impeach  the 

the  paper  in  a  suit  against  (not, the  indorser,  but)  instrument, 
some  prior  party  ?  Such  party  may  of  course  set  up  the  inva- 
lidity of  his  own  contract  against  a  holder  having  notice ;  but 
can  he  produce  the  indorser  as  a  witness  ?  In  the  time  of  Lord 
Mansfield  the  question  was  answered  in  the  negative;  no  per- 
son, it  was  held,  could  be  permitted  to  give  testimony  to  in- 
validate an  instrument  to  which  he  had  given  his  signature; 
having  given  a  credit  to  it,  he  could  not  afterwards  discredit  it.' 
But  the  rule  was  not  satisfactory  to  the  English  courts,  and 
some  twelve  years  later,  after  narrowing  it  to  negotiable  instru- 
ments, they  overturned  it,  and  held  the  indorser  competent 
notwithstanding  his  indorsement.*     In  this  country  there  is  a 

1  State  Bank  v.  Fearing,  16  Pick.  533 ;  Cases,  91. 

2  Erwin  v.  Downs,  15  N.  Y.  575  ;  Cases,  93.  Sec  Lennon  o.  Grauer,  159 
N.  Y.  433.  The  decision  in  the  two  cases  would  no  doubt  be  the  same 
under  the  Statute  ;  the  warranty  may  be  used  by  way  of  estoppel  as  well  as 
a  contract. 

«  "Walton  V.  Shelley,  1  T.  R.  296. 

*  Jordaine  v  Lashbrooke,  7  T.  R.  601. 


102  BILLS,  NOTES,  AND    CHEQUES.  [Chap.  VIII 

conflict  of  authority,  some  of  the  courts  having  followed  the 
earlier  English  rule/  others  having  followed  the  later  one,' 
while  still  others  have  adopted  a  middle  course.  It  will  only 
be  necessary  to  state  the  rule  adopted  by  courts  taking  the 
middle  ground.  According  to  that  rule,  the  indorser  is  a  com- 
petent witness  to  impeach  the  validity  of  the  paper,  if  the 
plaintiff  took  with  notice,  otherwise  not.'  But  the  better  and 
more  general  rule  treats  him  as  competent  in  either  case.  The 
rule  of  exclusion  applies  in  any  case  only  in  regard  to  facts  of 
the  time  of  the  execution  of  the  contract  sued  upon.* 

§  9.    Apparent  but  not  Real  Indorsement  (inter  Partes). 

What  appears  on  its  face  to  be  an  ordinary  indorsement,  and 

therefore,  prima  facie,  is  indorsement,  may  often,  between  the 

parties    thereto    and    subsequent    holders    in    like 
Evidence  to  '  i  •  i 

control  case,  be  shown  to  be  something  else,  and  that  con- 

mdorsement.  gig^gjjtly  with  regarding  the  terms  to  be  supplied 
by  law,  in  order  to  make  out  the  contract,  as  fixed ;  ^  for  that 
assumes  that  there  is  nothing  in  the  circumstances,  as  distin- 
guished from  the  actual  terms,  of  the  contract  to  affect  it.  Thus 
while  evidence  should  not  be  admissible  to  show  simpl}-  that 
what  appears  to  be  an  indorsement  in  blank  was  understood  to 
bave  been  intended  as  indorsement  without  recourse,  evidence 
of  the  time  and  circumstances  under  which  it  was  made  is  ad- 
missible, between  immediate  parties,  and  this  may  vary  its  effect 
materially,  even  to  making  it  on  the  one  hand  practically  an  in- 
dorsement without  recourse,  or  on  the  other  of  raising  the  grade 
of  liability,  or  indeed  of  modifying  it  in  any  one  of  several 
ways. 

1  Treon  v.  Brown,  14  Ohio,  482. 

2  Townsend  v.  Bush,  1  Conn.  260;  Cases,  94;  Haines  v.  Dennett,  11 
N.  H.  180  ;  Stafford  v.  Rice,  5  Cowen,  23;  Williams  v.  Walbridge,  3  Wend. 
415  ;  Freeman  v.  Brittin,  2  Harr.  (N.  J.)  192  ;  Taylor  v.  Beck,  3  Rand.  316  ; 
Stump  V.  Napier,  2  Yerg.  35. 

«  Thayer  v.  Grossman,  1  Met.  416  ;  Newell  v.  Holton,  10  Gray.  349  ;  Clapp 
V.  Hanson,  15  Maine,  345.     See  Davis  v.  Brown,  94  U.  S.  423. 

♦  WoodhuU  V.  Holmes,  10  Johns.  231  ;  Skilding  v.  Warren,  15  Johns. 
270;  Strong  v.  Wilson,  Morris,  84  ;  Drake  v.  Henly,  Walker  (Miss.),  541. 

*  Witherow  v.  Slayback,  158  N.  Y.  649. 


Sect.  9.]  INDORSEE'S  CONTRACT.  103 

Thus,  an  indorser  may  show  against  his  own  indorscvi  that  his 
own  indorsement  was  made  at  the  same  time  with  that  of  one  or 
more  other  indorsements,  as  part  of  one  common  transaction  by 
whicli  the  parties  named  became  jointly  bound.  That  could  not 
be  done  against  a  holder  for  value  without  notice ;  but  it  could 
be  shown  against  one  who  had  taken  the  paper  with  notice,  so 
as  to  require  him  to  sue  them  all  together,  if  at  all.  And  it 
could  be  shown  between  such  indorsers  themselves,  if  one  of 
them,  having  taken  up  the  paper,  should  call  upon  another  to 
l>aj  as  a  prior  indorser;  for  we  have  already  seen  that  joint 
indorsers  are  not  indorsers  at  all  between  themselves.^  ,  ^ 


S 


What  appears  to  be  the  ordinary  contract  of  indorsement  un- 
modified, may  be  shown  to  be  something  else  also  in  the  follow- 
ing casesMrhe  relation  of  principal  and  agent  may  be  shown  to  ^ 
exist  between  the  plaintiff  and  the  defendant;   in  such  a  case         I 
the   agent  acquires   nothing  of  his  own,  —  he  merely  holds  in        /f' 
right  of  his  principal.     Agaii^Blt  may  be  shown  that  the  paper        f-% 
was  indorsed  to  the  holder  for  some  special  purpose,  and  is  held       ' 
in  trust,  as  where  it  was  indorsed  for  collection  merely.     And 
againwjie  relation  of  principal  and  surety  may  be  shown  to  exist 
betwee4  the  parties,  as  where  the  indorsement  was  made  by  the 
defendant  at  the  request  and  for  the  accommodation  of  the  plain- 
tiff; that  too  would  defeat  liability  altogether.^     Or  it  might  be 
shown,  with  the  same  result,  tharaboth  plaintilf  and  defendant 
were  co-sureties  on  the  paper  for  another  person.     Or  again,  it 
might  be  shown  that  there  wa^|,  defence  arising  from  a  transac- 
tion of  which  the  giving  the  instrument  was  only  a  part,  the 
transaction  including  an  agreement  that  the  instrument  should 
be  taken  in  sole  reliance  upon  the  responsibility  of  the  maker  or 
acceptor,  and  that   it  was  indorsed  in  order  to  transfer  the  title 
in  pursuance  of  such  agreement,  so  that  the  attempt  to  enforce- 
payment  of  the  defendant  would  be  in  the  nature  of  a  fraud.^ 

5  See  Shaw  v.  Knox,  98  Mass.  21 4 

2  Case  V.  Spaulding,  24  Conn.  578. 

^  Upon  this  whole  subject,  see  Dale  v.  Gear,  38  Conn.  15  ;  Downer  v. 
Cheseborough,  36  Conn.  39,  Chaddock  v  Vanness,  35  N.  J.  517  ;  First  N* 
tiona]  Bank  v.  National  Marine  Bank,  20  Minn.  63. 


f£^ 


U^  i 


L^^^Jl»     i04  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  VIIL 

♦  V*^  ^***'***^ These  are  tlie  chief  cases  iu  which  what  appears  to  be  an  ordi- 
<*-*"*v«« ''t*  nary  indorsement  may  be  shown  to  be  something  else,  or  ren- 

Ll»a.*.ll^tMe  dered  inoperative  towards  giving  the  immediate  indorsee  aright 

f  VkJ^iA-^^oi  action  thereon.     But  where  the  defendant  or  the  plaintiff 

»  ^jtiM-^V^     makes  an  attempt  to  prove  that  what  stands  as  a  clear  and  un- 

I  itrt^  'Lji,  ambiguous  contract  of  indorsement  was  not  intended  to  be  such, 

merely  by  the  declarations  of  the  parties  made  at  the  time,  —  as 

*«5l  ^J^    by  showing  that  the  defendant  in  indorsing   understood  that 

•*'*^'****'he  was  not  to  be   liable,  and  that  the  plaintiff  received  the 

^X-*«»Cu^  indorsement  accordingly,  —  that  attempt,  according  to  the  cur- 

k« '}.4/«<.^     rent  of  authority,   will  not  be  allowed  to  succeed.^     The  law 

^_,t»tifc  t.    merchant  has  a  sufficient  and  an  exclusive  way  of  exempting 

/ic%-Ct«  d-i  iiidorsers  from  liability,  to  wit,   by  requiring  them   to  write 

^^jj^%^       *  without  recourse  '  or  the  like  words  in  connection  with  their 

z^*  indorsement.     It  matters  not  therefore  whether  the  indorser's 

-rt^  contract  be  called  a  written  contract;  the  'parol  evidence'  rule 

^      VT         of  the  common  law  has  nothing  to  do  with  it. '^ 

*  '  tiisUd  ^anV  of  United  States  v.  Dunn,  6  Peters,  51 ;  Davis  v.  Brown,  94  U.  S. 
^^T^  425  (permitting  evidence  of  eontemporaueous  written  agreement) ;  Bigelow  v. 
^  tA'*f^iL        Colton,  13  Gray,  309  ;  Hitchcock  v.  Frackelton,  116  Mich.  487  ;  Dale  v.  Gear, 

'  38  Conn.  15,  explaining  Case  v.  Spaulding,  24  Conn.  578  ;  Charles  v.  Denio, 

/ft  (Ifi^i^  42  Wis.  56 ;  Eaton  v.  McMahon,  id.  484 ;  Rodney  v.  Wilson,  67  Mo.  123  ; 
-Cft  ^tc^  Doolittle  V.  Ferry,  20  Kans.  230  ;  Martin  v.  Lewis,  30  Gratt.  672 ;  Woodward 
U^  ,  t0uv*'  V.  Foster,  18  Gratt.  200  ;  Citizens'  Bank  v.  Walton,  31  S.  E.  (Va.)  890;  Clarke 
iJj  ^-w  V.  Patrick,  60  Minn.  269 ;  Kulenkamp  v.  Groff,  71  Mich.  675  ;  Phelps  v.  Ab- 
.  .  •  bott,  114  Mich.  88  :  Doom  v.  Sherwin,  20  Cal.  234  ;  Citizens'  Bank  v.  Jones, 
fX,  Q/n-M**<L^^^  Cal.  30.  See  Equitable  Ins.  Co.  v  Adams,  173  Mass.  436,  as  to  the  mere 
)  HtJi,  "A^^  understanding  of  an  indorser.  The  courts  of  some  States  would  admit  evi- 
fc^l^^^.#  <liv  dence  of  the  Icind  if  the  indorsement  were" in  blank.  Ross  v.  Espy,  66  Penn. 
^^^  St.  481;  Harrison  v.  McKim,  18  Iowa,  485  ;  Iser  v.  Cohen,  1  Baxter,   421; 

p-K-^*'^  Rogers  v.  Bedell,  97  Tenn.  240  ;  United  States  Bank  v.  Geer,  55  Neb.  462  ; 
*■**<•  ff^  True  V.  BuUard,  45  Neb.  409.  These  cases  stand  upon  the  erroneous  notion 
l^^^t  ^    that  the  *  parol  evidence '  rule  of  the  common  law  applies  to  the  case.     Ante, 

'  3  See  ante,  pp.  5,  6. 


Sect.  1.]  INDORSEE'S  CONTRACT.  105 

T^h^^bnt/^^nT—  Hov\/ 


CHAPTER  IX. 

INDORSEE'S  CONTRACT  CONTINUED:  PROCEEDINGS 
BEFORE   DISHONOR. 

§  1.     Presentment  and  Demand  distinguished:  Mode 

OF  THE  Steps. 

The  first  thing  to  be  done  to  fix  the  liability  of  an  indorser 
is   to   make   presentment    and  demand  ;    which   in  the   case  of 
promissory  notes  or  cheques  will  be  for  payment ; 
in  the  case  of  bills  of  exchange  may  be  either  for  and  demand 

,  J.  ,  T  J.         •  required. 

acceptance  or  for  payment,  according  to  circum-  ^ 
stances.  In  ordinary  cases  it  is  not  necessary  to  draw  any 
distinction  between  presentment  and  demand,  and  therefore  the 
two  are  often  treated  as  one,  either  term  —  presentment  or  de- 
mand—  being  used  indifferently  as  including  all  that  the  law 
so  far  requires. 

In  point  of  fact,  however,  the  two  are  separate  and  distinct 
steps,  and  the  law  requires  both  or  some  equivalent  or  substitute- 
Sometimes  it  may  accordingly  be  necessary  to  distinguish  be- 
tween the  two,  as  where  the  defendant  contends  that  one  or  the 
other  was  omitted.  Hence  the  nature  of  each  should  be  pointed 
out. 

But  the  terms  themselves  fairly  indicate  their  ordinary  mean- 
ing. Presentment  is  the  act  of  handing  over  the  paper  to 
the  maker,  drawee,  or  acceptor,  or  at  least  of  ex-  Meaning  of 
hibiting  it  to  him,  with  a  view  to  payment  or  ^^^  *'^'^^* 
acceptance  according  to  the  case  and  the  purpose ;  demand  is  a 
request  upon  the  party,  at  the  same  time,  to  accept  or  pay, 
according  to  the  case  and  the  purpose.  That  is  the  ordinary 
meaning  of  the  terms ;  and  the  ordinary  meaning  is  now  the 
subject  for  consideration :  excuses  of  presentment  and  demand 
will  be  considered  in  another  place. 


106  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IX. 

Presentment  is  required  by  law,  not  indeed  to  charge  the 
party  primarily  liable  ^  (unless  there  be  a  clear  condition  to 
that  effect),  but  —  (1)  To  enable  the  party  called 
upon  to  judge  of  the  genuineness  of  the  paper,  for 
wliich  purpose  (and  for  the  next  one)  he  may  keep  it  for  a  short 
time;  (2)  To  enable  him  to  judge  of  the  holder's  right  to  the 
paper;  (3)  Where  presentment  is  for  payment,  that  on  payment 
he  may  have  possession  of  the  paper  as  a  voucher,  or  for  any 
other  needful  purpose.^  Demand  is  necessary  to  show  the  hold- 
er's purpose  to  require  the  maker,  drawee,  or  acceptor  to  do  what 
has  been  undertaken  for.  There  need  not  be  any  words  of 
demand  or  request,  however,  or  of  presentment,  if  the  act  of 
the  holder  in  presenting  is  understood  to  mean  what  such  words 
would  only  in  another  way  convey;  not  the  form,  but  the  sub- 
stance, is  what  the  law  requires.^ 

An  equivalent  to  handing  over  or  exhibiting  the  paper  may, 
as  we  have  intimated,  satisfy  the  law  in  regard  to  presentment. 
V,    .    ,         ,    In  the  case  of  paper  not  payable  on  its  face  (Jr  llf 

Equivalents  of  ^    ^  i  . 

presentment      *^f»i^  at  some  bank,  there  can  hardly  be  an  equiv- 

an      eman  .      q\q^^  ^q  ^j^g  handing  over;  there  may  be  a  waiver, 

of  which  hereafter;  but  waiver  dispenses  with  the  requirement 

instead  of  being  equMeijt>  ^^t^jnU^aj^oJ^^^^^^ 

payable  at    bank,  the    law  permits  aiif^equrvaTent,   Ir    rafneD  a 

substitute,   for  what    is    naturally  meant  by  presentment ;    the 

fact  that  the  paper  is  in  the  bank  at  maturity,  to  the  knowledge 

of  the  bank,  satisfies  the  law,  so  far  as  presentment  is  concerned, 

where  the  paper  is  on  its  face  pia3'^able  at  such  bank.*     And  this 

upon  the  plain  ground  that  it  would  be  a  mere  ceremony,  in 

most  cases  of   the  kind,  to  require  the  holder   to  come  to  the 

1  N.  I.  L.  §  77. 

2  Musson  V.  Lake,  4  How.  262 ;  N.  I.  L.  §  81.  See  also  Arnold  v.  Dresser, 
8  Allen,  435.  The  interest  of  the  maker  or  acceptor  in  presentment  is  im- 
portant to  remember,  for  it  explains  how  such  party  can  by  waiver  at  ma- 
turity cut  down  rights  of  an  indorser;  the  maker  or  acceptor  waives  his  own 
rights,  and  the  corresponding  ones  of  the  indorser  are  gone,  by  necessary 
eonsequence. 

»  Waring  v.  Betts,  90  Va.  46. 

*  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 


Sbct.  1.]  INDOKSER'S   CONTRACT.  107 

"bank  which  already  has  the  paper,  call  for  it,  and  stand  thero 
with  it,  perhaps  till  the  close  of  its  business  hours,  in  waiting 
for  the  payor,  or  —  what  would  be  silly  —  to  offer  it  back  to  the 
bank  in  the  name  of  presentment. 

However,  it  is  not  the  presence  of  the  paper  in  the  bank  that 
is  treated  as  equivalent  to  or  a  substitute  for  handing  it  over; 
it  is  the  presence  of  the  paper  there  (1)  at  maturity,  (2)  to 
theknowledge  of  the  bank,  that  satisfies  the  law.^  It  is  not 
enough  that  the  holder  has  sent  the  jjaper  to  the  bank  before 
maturity,  though  that  fact  might  be  material  in  a  suit  against 
the  bank  for  neglect  of  duty  in  the  matter;  it  is  not  enough 
that  the  paper  was  in  the  bank  at  maturity,  though  that  might 
be  still  more  important  in  such  a  suit  against  the  bank.  If  the 
bank  knew  nothing  of  the  presence  of  the  paper,  the  paper 
might  as  well  not  be  there,  for  in  such  a  case'  the  bank  cannot 
do  the  real  thing  required,  —  make  the  payment.^  -^ 

There  is  another  case  of  equivalency,  by  local  custom,  in  rela- 
tion to  presentment.  In  cases  of  the  kind  just  referred  to,  the 
paper  is  on  its  face  payable  at  the  bank  named ;  but  it  is  not 
uncommon  in  certain  States  for  the  holder  to  send  the  paper 
to  the  bank  with  which  he  usually  deals,  for  collection.  In 
such  a  case  the  practice  is  for  the  bank  to  notify  the  maker, 
drawee,  or  acceptor  that  it  holds  the  paper  for  collection,  and 
requests  paynient.  Then  if  the  paper  is  left  in  the  bank  until 
its  maturity,  that  will  satisfy  the  requirement  of  presentment.' 
Of  this  case  too  it  should  be  observed  that  it  is  not  the  notice 
of  the  bank  that  constitutes  presentment  (or  demand),  but  the 
presence  of  the  paper  in  the  bank  at  maturity. 

In  the  same  cases  of  instruments  payable  at  bank,  it  is 
equally  obvious  that  the  law  cannot  insist  upon  demand  in  the 
ordinary  sense.  The  instrument  is  to  be  lodged  in  the  bank, 
and  the  maker  or  other  payor  knows  the  fact,  and  if  he  intends 
to  pay  will  provide  the  bank  with  the  funds  before  or  on  the  day 
of  the  maturity,  or  may  have  funds  on  deposit  generally  with 

^  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 
a  Id. 

»  Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  13,  23.  See  also  West  u. 
Brown,  6  Ohio  St.  542  ;  Cases,  108. 


108  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IX 

the  bank  subject  to  the  payment  of  his  paper.  The  bank 
accordingly,  if  the  instrument  has  been  lodged  with  it  for 
collection,  has  but  to  look  at  his  books  to  see  whether  the 
party  has  provided  for  payment  if  he  does  not  appear;  and 
looking  over  its  books  completes  demand  of  payment,  if  done 
at  the  right  time;  to  wit,  at  the  close  of  business  hours  on  the 
day  of  maturity.  Even  that  may  not  be  necessary  if  the  bank 
knows  that  there  is  nothing  there  with  which  to  make  payment; 
to  look  over  the  books  in  such  a  case  would  be  idle.  Lodging  the 
instrument  in  the  bank  for  collection  appears  to  be  the  essential 
feature  of  demand. 

It  appears  to  answer  the  requirement  of  presentment  that  the 
holder,  having  the  instrument  with  him,  but  not  exhibiting  it 
when  he  makes  demand,  so  describes  it  as  to  leave  no  doubt 
that  the  payor  must  understand  of  what  instrument  the  demand 
is  made.^     Still  the  paper  must  be  produced  if  it  is  called  for.^ 

•  /  ■  ■  ,T- LT* 

*lf  *>f JiTMENT'^VVntf ^  Place  of  Presentment. 

A  clear  line  of  cleavage  runs  through  the  whole  law  relating 
to  the  indorser's  contract  between  paper  payable  (on  its  face  or 
Paper  pavable  ^^  notice)  at  bank,  and  paper  not  payable  at  bank, 
at  bank  or  not.  With  regard  to  the  first  of  the  two,  the  process  of 
presentment  has  already  been  described  in  speaking  of  equiva- 
lents. But  it  should  be  observed  that  where  the  instrument  is 
payable  at  any  place  designated  by  it,  whether  at  bank  or  else- 
where, presentment  should  be  made  at  that  place;  present- 
ment anywhere  else  will  be  of  no  avail  in  fixing  an  indorser's 
liability,    apart   from  waiver  or  sufficient   modification  of   the 


R^-*^^ 


contract.' 

An  instrument  payable  '  at  bank '  is  payable  at  any  bank  in 

1  King  V,  Crowell,  61  Maine,  244 ;  Arnold  v.  Dresser,  8  Allen,  435 ; 
Etheridge  v.  Ladd,  44  Barb.  69. 

2  Ocean  Bank  v.  Fant,  50  N.  Y.  474  ;  N.  I.  L.  §  81. 

3  N.  I.  L.  §§  79,  80  ;  Hutchison  v.  Crutclier,  98  Tenn.  421.  Present- 
iment must  be  made  at  a  bank  at  which  the  instrument  is  payable  though  the 
bank  may  have  passed  into  the  hands  of  a  receiver.  But  if  the  bank  design 
nated  be  closed  at  maturity  and  a  new  bank  takes  its  place,  no  demand  is 
necessary.  Hutchison  v.  Crutcher,  supra.  Further  see  Central  Bank  v. 
Allen,  16  Maine,  41  ;  Berg  v.  Abbott,  82  Penn.  St.   177.  ,      , 


Sect.  2.]  INDORSER'S   CONTRACT.  109 

tBe  place  of  payment,  and  may  be  lodged  for  payment  accord- 

inclv.^     In   the   case  of  a  bank  having  branches, 

,^-^  ,  ,  ,  .,,  ,  Branch  banks 

cheques   are    payable   at   the    particular    branch  at 

which  the  drawer  keeps  his  account;  hence  presentment  should 

be  made  there  in  all  cases  in  which  the  holder  has  notice  or  is 

informed  of   the   proper  place.*     He  would    no  doubt  be  told 

where  to  go  if  he  presented  the  paper  at  the  wrong  place,  and 

hence  could  not  treat  the  refusal  as  a  dishonor.     If  not  in  any 

way  informed,  he  may  have  made  a  good  presentment,  though 

he  made  it  at  the  wrong  place. 

The  drawee  of  a  bill  of  exchange  majr-designate  any  place 

•within  the  city  or  town  in  which  the  bill  is  payable  as  the 

place  of  payment,'  but  cannot  require  presentment  ^ 

■r  L    .J  '  1  r  ^  Drawee  may 

in  another  city  or  town.*     It  remains  to  consider  name  place  of 
cases  of  presentment  of  paper  payable  at  no  place 
designated. 

If  no  place  of  payment  is  designated  on  the  paper,  —  in  which 
case  the  paper  is  commonly  spoken  of  as  '  payable  generally,'  — 
it  is  payable  at  the  address  given,  if  any,  on  the  Payable 
instrument,^  otherwise  at  the  place  of  business  or  generally, 
of  residence  of  the  maker  or  acceptor;  that  is,  in  the  absence  of 
any  special  agreement  between  the  parties.®  In  regard  to  oral 
agreements  changing  the  place  of  payment  from  that  designated 
by  law,  there  is  some  slight  want  of  harmony  in  the  authorities, 
one  or  two  cases  appearing  to  deny  the  admissibility  of  evidence 
to  show  such  agreement.'  But  the  better  view  treats  the  doc- 
trine of  place  of  presentment,  as  it  is  laid  down  by  law,  as  in- 
tended only  to  supply  any  want  of  evidence,  and  not  as  fixed 

^  Hazard  v.  Spencer,  17  R.  I.  561.  To  lodge  the  instrument  for  payment 
in  a  trust  company  would  not  be  sufficient.     Nash  v.  Brown,  165  Mass.  384. 

2  Prince  v.  Oriental  Bank,  L.  R.  3  App.  Gas.  325,  332  ;  Woodland  v. 
Pear,  7  El.  &  B.  519. 

3  Troy  Bank  v.  Lauman,  19  N.  Y.  477. 

*  Niagara  Bank  v.  Fairnian  Manuf.  Co.,  31  Barb.  403  ;  Walker  v.  Bank  of 
New  York,  13  Barb.  636.     But  compare  Mason  v.  Franklin,  3  Johns.  202. 

6  N.  I.  L.  §  80,  2.  6  N.  I.  L.  §  80,  3. 

'  Pierce  v.  Whitney,  29  Maine,  188  ;  Anderson  v.  Drake,  14  Johns.  114 
jdictum)  ;  Story,  Notes,  §  49,  and  note. 


110  BILLS,  NOTES,   AND   CHEQUES.  [Chaf.  IX. 

and  absolute,  and  accordingly  admits  evidence  of  any  agreement 
or  understanding  on  the  subject.^ 

In  the  absence,  then,  of  agreement,  the  legal  designation  [)re- 
vails;  and  in  the  absence  of  a  designated  address  the  law,  it 
Place  of  busi-  seems,  designates  the  place  of  business,  if  there  be 
ness  preferred,  q-^q^  ^g  presumptively  the  place  for  making  present- 
ment.* The  place  of  business  is  (probably)  preferred  in  law  to 
the  place  of  residence,  because  at  the  party's  place  of  business 
rather  than  at  his  residence  he  expects  to  meet  his  engagements, 
especially  to  attend  to  calls  for  money.  The  consequence  is  that 
presentment  at  the  residence  of  a  maker  or  acceptor  having  a 
known  place  of  business  would,  in  principle,  in  the  absence  of 
sufficient  reason,  be  insufficient  in  case  of  refusal.  We  say 
'  in  principle,'  for  the  authorities  have  not  often  had  occasion 
to  speak  plainly  to  the  point,  and  many  of  them  accordingly 
have  been  content  with  saying  generally  that  presentment  should 
be  made  at  the  place  of  business  or  of  residence.^ 

There  is  no  doubt  that  presentment  at  the  place  of  business  is 
good;  the  only  doubt  is  whether  presentment  there  is  required. 
But  whatever  the  rule  on  that  point,  '  place  of  business  '  must 
be  taken  in  a  real,  substantial  sense.  It  is  not  enough  that 
some  place  has  been  used  temporarily  for  the  transaction  of 
some  particular  piece  of  business,  such  as  merely  settling  up  old 
books  or  accounts;  it  must  be  the  regular,  known  place  for  the 
transaction  of  the  ordinary',  general  business  of  the  party,  in- 
cluding the  payment  of  bills.  The  counting-room  of  a  mer- 
chant would  be  a  proper  place  for  presentment;  a  mercantile 
club-room  ordinarily  would  not  be.  The  general  room  of  a 
workshop,  or  any  part  of  a  workshop  having  no  office,  would  be 

1  Pearson  v.  Bank  of  Metropolis,  1  Peters,  89  ;  State  r.  Hiird,  12  Mass. 
171  ;  Sussex  Bank  v.  Baldwin,  2  Harrison  (N.  J.)  487. 

2  King  V.  Holmes,  11  Penn.  St.  456  ;  West  v.  Brown,  6  Ohio  St.  542. 
See  Bank  of  Red  Oak  v.  Orvis,  42  Iowa,  691. 

3  See  Sussex  Bank  v.  Baldwin,  2  Harrison  (N.  J.),  4S7  ;  Brooks  i'.  Blaney, 
62  Maine,  456  ;  King  v.  Crowell,  61  Maine,  244  ;  Maiden  Bank  v.  Baldwin, 
13  Gray,  154.  So  too,  unfortunateh',  in  the  Statute.  N.  I.  L.  §  80,  3: 
'  Where  no  place  of  payment  is  specified,  and  no  address  is  given,  and  the 
instrument  is  presented  at  the  usual  place  of  business  or  residence  of  the  [)«r- 
«on  to  make  payment,*  the  presentment  is  made  at  the  proper  place. 


Sect.  2.]  INDORSER'S  CONTRACT.  HI 

no  place  for  making  presentment;  the  place  would  indeed  be  a 
place  of  business,  but  not  a  place  of  business  at  which  the  owuer 
in  ordinary  cases,  would  be  apt  to  pay  his  bills. 

Indeed,  an  office  at  which  one  pays  one's  bills,  among  other 
things,  is  enough  to  make  presentment  there  good,  if  not  to 
require  presentment  there.  For  example .  The  maker  of  a 
promissory  note  has  a  room,  occupied  also  by  other  persons  for 
business  purposes,  in  which  he  is  accustomed  to  receive  business 
csills,  and  at  which  he  directs  such  calls  to  be  made.  Present- 
ment of  the  note  is  made  there,  and  not  at  the  maker's  resi- 
dence.    The  presentment  is  good.-^ 

If,  however,  the  maker  or  acceptor  has  no  such  known  place 
of  business,  the  holder  must  make  demand  at  his  residence, 
if,  again,  he  has  a  known  residence,  or  one  which  pjace  of 
can  be  found  by  reasonable  diligence.  If  there  is  residence, 
neither  place  of  business  nor  of  residence  so  to  be  found,  the 
holder  has  nothing  to  do  in  the  way  of  presentment  except  in 
person  or  by  his  agent  to  be  in  the  town  in  which  the  i^aper  is 
payable,  at  maturity,  read}'^  with  the  paper  to  receive  payment.- 

But  the  maker  or  acceptor  may  have  removed;  and  the  holder 
has    not   performed    his    duty    in    the    matter    of    presentment 
by  merely  seeking  out  the  last  known  place  of  busi- 
ness  or  residence  of  the  party,  and  failing  to  find  maker  or 
there  the  person  sought.     That  is  not  presentment, 
nor  is  any  case  of  excuse  made  by  such  facts.     For  example: 
The   defendant  is  indorser   of  an  accepted  foreign  bill   of   ex- 
change,   which  has  been  protested  for  dishonor.     The  protest 
sets  out  a  '  presentment '  made   '  at  the  late  place  of  business  ' 
of  the  acceptor,  *  to  the  person  there  in  charge,'   who  answered 
demand  of  payment  by  saying,    '  the  acceptor  is  not  here  now, 
nor  have  we  any  funds  '  with   which  to  pay.     That  does  not 
disclose  facts  sufficient  to   constitute  presentment  and  demand; 
reasonable  diligence  requires  further  inquiry.^ 

1  West  V.  Brown,  6  Ohio  St.  542. 

2  Meyer  v.  Hibslier,  47  N.  Y.  265;  Maiden  Bank  v.  Baldwin,  13 
Gray,  154. 

3  Brooks  V.  Blaney,,62  Maine,  456,  Freeman  r.  Boynton,  7  Mass.  483 


.XM«JK 

112  BnrLbT  NOTES,  AND   CHEQUES.  [Chap.  IX. 


;  Indeed,  it  is  the  duty  of  the  holder  to  follow  the  maker  or 
acceptor  upon  his  removal,  if  he  has  not  removed  heyond  the 
State;  or  rather  the  holder  should  exercise  reasonable  diligence 
to  find  him.  If  by  such  diligence  he  can  find  the  maker  or 
acceptor,  he  must  exercise  the  diligence.^  If  the  maker  or 
acceptor  has  removed  beyond  the  State,  since  the  paper  was 
made  or  accepted,  the  holder  performs  his  duty  in  the  matter  of 
place  of  presentment,  by  calling  for  payment  at  the  party's  last 
place  of  business  or  of  residence  according  to  the  particular 
case.'^  Whether  that  is  necessary  is  disputed;  by  the  better 
view  it  is.'  In  some  States,  indeed,  it  is  held  that  diligence 
must  be  exercised  to  obtain  payment  even  where  the  maker  or 
acceptor  has  absconded.*  But  of  such  matters  under  the  head 
of  excuses.  Of  course,  if  the  maker  or  acceptor  lived  in  another 
State  when  the  paper  was  made  or  accepted,  the  paper  must  be 
sent  forward  for  presentment  there.^ 

The  place  of  date  of  the  paper  is  prima  facie  evidence  of  the 
place  for  presentment,  if  no  other  is  indicated  upon  it ;  but  it  is 

only  prima  facie  evidence.®  The  date,  whether 
Place  of  date.         .      .  .•  •  i.     c  ix. 

of  place  or  time,  is  no  necessary  part  of  the  con- 
tract, and  the  actual  fact  may  be  shown.  Even  where  paper  is 
payable  '  at  the  office  '  of  the  maker  or  acceptor,  the  place  of 
date  does  not  necessarily  fix  the  place  for  presentment ;  where- 
ever  the  party's  '  office '  is,  there  presentment  should  be 
made.' 

1  Exercising  diligence  will  be  enough,  though  it  fail  of  efifect.  Bank 
of  Utica  i>.  Bender,  21  Wend.  643  ;  Cases,  191. 

2  Taylor  v.  Snyder,  3  Denio,  145.     See  N.  I.  L.  §  80,  4. 

8  Wheeler  v.  Field,  6  Met.  290.  Contra,  Gist  v.  Lybrand,  3  Ohio,  308  ; 
Foster  v.  Julien,  24  N.  Y.  28,  Mason,  J.,  dis. 

*  Pierce  v.  Gate,  12  Cush.  190.  But  see  contra,  Lehman  v.  Jones,  1  Watts 
&  S.  126 ;  Duncan  v.  McCulIough,  4  Serg.  &  R.  480. 

^  Taylor  v.  Snyder,  supra. 

6  Childs  y.  Laflin,  55  111.  156  ;  Blodgett  r.  Durgin,  32  Vt.  361 ;  Taylor  v. 
Snyder,  3  Denio,  145. 

^  Childs  V.  Laflin,  supra. 


V.^  ^Cw/»^  0-f^  \^^ 


&:CT.  3.]  INDORSEE'S  CONTRACT.  113 

§  3.     Time  of  Presentment. 

Coming  to  the  question  of  the  time  of  presentment,  we  en- 
counter a  distinction  between  presentment  for  acceptance  and 
presentment  for  payment,  which  must  first  be  dis-         . 

posed  of.  presentment 

T)  ,  .    r  .  .  1         for  acceptance. 

Presentment  for  acceptance  is  necessary,  as  has  *^ 

heretofore  been  observed,  only  in  the  case  of  bills  payable  at      , 
sight,   and  not  then  if  by  law  the  instrument  is   not  entitled  ^^^ 
to  grace.     But  bills  payable  at  a  time  stated  after  date  may  f  -  mTT^^^^ 
be  presented  for  acceptance,  as  the  drawer  is  considered  to  con-     '      "^ 
tract  that  the  holder  shall  have  the  security,  if  he  will,  of  accept- 
ance.^ 

With  regard  to  bills  payable  at  a  stated  time  after  date,  the 
holder  may  make  presentment,  if  at  all,  at  any  time  before 
maturity  of  the  bill.  It  is  doubtful  whether  there  bjUs  payable 
could  be  a  presentment  for  acceptance,  in  any  case,  ^^'^^  *^**^' 
after  maturity;  presentment  after  maturity  would  naturally  be 
for  payment.  But  that  is  not  material,  for  all  indorsers_would 
be  discharged  by  failure  to  presenj;  the  instrument  for  payment 
at  maturity,  except  such  as  had  waived  JJie^  requirement^  aQ(l 
such  as  may  have  indorsed  after  maturi_ty. 

With  regard  to  bills  payable  at  or  at  a  stated  time  after 
sight,  the  case  is  different.     The   law  merchant   requires  pre- 
sentment of  such  paper  within  a  reasonable  time ;  -.j,   payable 
but  that  rule  is  interpreted  to  permit  the  circula-  after  sight: 
tion  of  such  paper  indefinitely  before  presentment, 
so  that  the  Statute  of  Limitations  does  not  run  out.     That  is  to 
say,  the  contract  of  the  drawer  and  indorsers  of  such  a  bill  i3 
that  the  holder  may   present  the  bill  at  any  time  within  the 
period  of  the  Statute  of  Limitations,  provided  that  the  paper  is 
kept  in  circulation  meantime;    when  finally  presentment  for  ac- 
ceptance is  made,  the  taking  of  the  other  steps  required  in  case 
of  dishonor  will  accordingly  fix  liability.     For  example:  A  sight 
bill  is  sent  from  Chicago  to  a  distant  territory  on  the  day  of  its 
date.     After  some  detention  in  the  mails  it  reached  its  destina- 

1  N.  I.  L.  §  68. 
8 


114  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IX. 

tion,  when  the  holder  puts  it  into  circulation  at  the  first  oppor- 
tunity, and  it  is  then  kept  in  circulation  as  well  as  the  thinly- 
settled  condition  of  the  territory  permitted.  Without  unneces- 
sary delay  it  is  presented  to  the  drawee  thirty-five  days  after  its 
date.  The  presentment  is  good.^  Again  :  The  defendant  in 
London  indorses  to  the  plaintiff  a  hill  of  exchange  drawn  iu 
London  on  A  at  Calcutta,  payable  to  order  sixty  days  after: 
sight.  The  bill  is  dated  March  5.  On  April  30  following  tlie 
hill  is  indorsed  by  the  plaintiff  in  England  to  A  of  Calcutta  ; 
on  May  22  next  the  bill  is  sent  to  India,  and  received  there 
early  in  October;  shortly  afterwards  it  is  presented  for  accept- 
ance, and  acceptance  is  refused  ;  due  protest  and  due  notice  of 
dishonor  follow.  It  is  for  the  jury  to  say  whether  the  bill  was' 
presented  to  the  drawee  in  reasonable  time;  the  fact  that  the 
paper  was  kept  out  in  circulation  for  so  long  time  not  being 
in  itself  unreasonable.^ 

The  bill  should,  however,  be  kept  in  circulation,  as  far  as 
circumstances  reasonably  permit,  or  it  should  be  presented  for 
acceptance ;  it  should  not  be  locked  up.  To  lock  it  up,  which 
means  to  hold  it  when  it  might  reasonably  be  passed  on  in  cir- 
culation or  sent  forward  for  presentment,  would  discharge  the 
drawer  and  indorsers.^  What  is  a  reasonable  holding,  and 
hence  not  a  locking-up,  must  depend  upon  circumstances,  as  the 
examples  above  given  show.  In  cases  lying  on  the  border,  the 
question  of  reasonableness  must  ordinarily  be  left  to  the  jury; 
in  clear  cases  the  court  will  rule  on  the  facts.  The  court  would 
rule  that  to  keep  a  bill  an  entire  day  could  not  be  unreasonable; 
it  has  been  ruled  that  to  hold  an  inland  bill  payable  after  sight 
in  London  until  the  fourth  day  after  receiving  it,  within  twenty 
miles  of  London,  is  not  unreasonable.* 

The  rule,  indeed,  is  not  a  hard  and  fast  one.  It  may  ba 
entirely  changed  by  custom;  if  there  be  a  clear  and  determinate 
usage  of  trade  at  the  place  of  payment,  which  regulates  the  time 

1  Montelius  j;.  Charles,  76  111.  303. 

2  Muilman  v.  D'Egiiino,  2  H.  Black.  565. 

'  Id.  ;  Goupy  v.  Harden,  7  Taiuit.  159  ;  Mellish  v.  Rawdon,  9  Bing.  416  ; 
Middleton  Bank  v.  Morris,  28  Barb.  616. 

*  Fry  V.  Hill,  7  Taunt.  397.     See  Haiker  v.  Anderson,  21  Wend.  372L 


I 


Sect.  3.]  INDORSER'S   CONTRACT.  115 

of  presentiiifMit,  that  usage  is  considered  as  entering  into  the 
contract  of  tlie  drawer  and  indorsers,  and  presentment  must  be 
made  accordingly.^ 

It  has  been  said  that  to  indorse  paper  after  maturity  is  equiva- 
lent to  drawing  a  bill  at  sight,  so  far  as  time  is  concerned.'*  But 
that  is  clearly  a  mistake.  It  cannot  be  necessary  paper  indorsed 
to  present  such  ])aper  for  acceptance,  as  would  be  after  matunty. 
necessary  by  the  unwritten  law  merchant  of  sight  bills ;  the 
paper  too  might  be  a  promissory  note  or  a  cheque.  The  true 
view  of  the  case  is  that  indorsement  after  maturity  amounts  to 
an  order  to  pay  on  demand} 

Next  of  presentment  for  payment,  in  the  same  matter  of 
time ;  and  first,  of  grace  according  to  the  unwritten  law  mer- 
chant.    The  cardinal  rule  in  ordinary  cases  is  that  ,,      .„     , 

•'  Unwritten  law- 

presentment  for  payment  must  be  made  at  matur-  as  to  grace: 

ity,  —  that  is,  on  the  day  when  by  law  payment  is 

due.  If  the  paper  is  payable  on  demand,  and  by  the  Statute0  pA^  ^^*^ 
if  it  is  payable  at  sight,  the  paper  is  not  entitled  to  grace;  it .is*-i'~**^c**' 
due  jjresently,  and  presentment  may  be  made'  on  the  day  pf^^'V*"*^ 
delivery,  or  on  any  other  day,  excepting  non-secular  days.  I'^^^.^u^.ft-' 
other  words,  the  paper  is  at  its  maturity  all  the  time.  Its,ci.^t^v4* 
maturity  is  passed  by  the  law  merchant  upon  the  expiration,^^'''-***^ 
after  issuance,  of  a  reasonable  time,^  a  matter  regulated  by^xO*^^ 
statute  in  some  States,  at  least  in  regard  to  promissory  notes. ^^d^^^ 
The  rule  applies  to  such  instruments,  as  well  as  to  others,'/^*—  ^^^ 
that  presentment  after  maturity  is  too  late  to  fix  the  liability^^  c*>4a 

1  Story,  Bills,  §  231  ;  Mellish  ;;.  Rawdon,  9  Bin^.  416.  JJt«  Jt**-**- 

^  Light  V.   Kingsbury,   50  Mo.  331  ;  Tyler  v.   Young,   30  Penn.  St.  144.^ "i^  A*' 

See  Bassenhorst  v.  Wilby,  45  Ohio  St.  333,  337.  M:^  *'^'*^ 

3  Pryor   v.    Bowman,    38   Iowa,  92;    Leavitt  v.   Putnam,    1  Sandf.    l^^  ;JLf^  if 
Patterson  v.  Todd,  18  Penn.  St.  426  ;  Swartz  v.  Redfield,  13  Kans.  550.     Seer^^V^^ 
Landon  v.  Bryant,  69  Vt.  203.  ^K-^-t-*-*- 

*  N.  I.  L.  §  92.  The  Statute  has  been  repealed  in  Massachusetts  in  regard^^^^*^ 
to  sight  paper,  and  grace  thereon  restored.     1899,  ch.  130.  ~~m*~  P^^ 

*  N.  I.  L.  §  78.  In  regard  to  demand  paper  payable  semi-annually,  see  oi^^f-C^,/^ 
the  time  for  demand  Beardsley  v.  Hawes,  71  Conn.  39.  This  will  often  m-n^tTm,  ^ 
elude  mortgage  notes.  Such  instruments  though  payable  on  demand  apj^ear  t-^  j  * 
to  run  for  six  months  before  being  overdue.  *\~*-m    tA     t-- 


~a» 


116  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IX. 

of  an  indorser ;  unless  the  paper  is  indorsed  after  maturity,  as 
it  may  be,  when  it  becomes  due  again  after  a  reasonable  time, 
and  must  be  presented  accordingly  to  bind  those  who  indorsed 
after  maturity.^ 

In  the  uncommon  case  of  paper  in  which  grace  is  excluded 
by  the  terms  of  the  paper,  —  the  paper  not  being  payable  on 
demand,  —  payment  is  due,  in  other  words  the  paper  matures, 
as  if  it  were  an  instrument  of  the  common  law  instead  of  the 
law  merchant.  Thus,  if  the  day  of  payment,  reckoned  literally, 
would  fall  on  Sunday  or  any  other  non-secular  daj-^,  it  is  due  on 
the  following  day,  and  presentment  for  payment  should  be 
made  on  that  day,  not  before,  not  after. ^  If  two  non-secular 
days  should  come  together,  the  first  being  the  one  on  which 
payment  otherwise  would  be  due,  the  paper  does  not  reach 
maturity  until  after  both  those  days  have  passed. 

This  leaves  us  with  the  case  of  paper  entitled  (by  the  un- 
written law)  to  grace.  In  such  cases  the  paper  reaches  its 
maturity  three  days  after  the  time  at  which  by  its 
to  grace  :  how  terms  literally  taken  it  would  be  due;  and  present- 
ment should  be  made  on  the  last  day  of  grace,  not 
before,  not  after.  If  what  would  be  the  third  day  of  grace 
should  be  Sunday  or  any  other  non-secular  day,  the  paper  ma- 
tures on  the  second  day^  or  on  the  first  day  of  grace  if  the  day 
before  is  also  a  non-secular  day.  Here,  indeed,  is  said  to  be  a 
survival  of  the  original  idea  of  days  of  grace ;  these  were  at 
first,  according  to  current  statement,  mere  favor  extended  by  the 
holder,  and  hence,  as  they  could  not  then  be  required,  the  time 
cannot  now  be  increased.  However  lame  the  reasoning,  sup- 
posing it  to  rest  on  fact,  the  law  is  clear  and  positive  ;  grace 
is  cut  off  by  the  law  merchant,  not  increased,  by  non-secular 
days  at  payment  time.  For  example :  The  defendant  is  in- 
dorser of  a  promissory  note  made  on  the  first  day  of  June  and 
payable  one  month  after  date.  Payment  is  demanded  on  the 
5th  of  July  and  refused,  and  notice  at  once  given  to  the  defend- 
ant.    The  defendant  is   not  liable  ;  presentment  should  have 

1  Bassenhorst  v.  Wilby,  45  Ohio  St.  333. 

2  Capital  Bank  v.  American  Bank  51  Neb.  707,  710. 


Sect.  3.]  INDORSEE'S  CONTRACT.  UT 

been  made  on  July  3/  unless  that  day  also  was  a  nou-secular 
day,  in  which  case  it  should  have  been  made  on  July  2.'^ 

If  the  instrument  (entitled  to  grace)  is  on  its  face  payable  in 
instalments,  each  instalment  is  entitled  to  grac,e_;  there  can  be 
no  breach  of  the  contract,  and  hence  no  proper  presentment, 
touching  an  instalment,  except  on  the  last  day  of  grace,  treat- 
ing the  instalment  in  question  a.s  if  it  were  a  separate  and 
distinct  iindertaking.  For  example:  The  defendant  is  indorser 
of  a  promissory  note  dated  Nov.  19,  1888,  and  payable  by  equal 
instalments  on  the  19th  of  November  in  each  .succeeding  year 
for  seven  years.  The  instalment  due  in  1892  is  the  subject  of 
the  present  suit  ;  presentment  for  payment  of  which  was  made 
and  refused  November  22  of  that  year,  and  was  followed  at  once 
by  notice  of  dishonor.     The  presentment  is  good.* 

A  like  rule  would  apply  if  it  were  provided,  as  often  is  the 
case,  that  if  any  instalment  were  not  paid  when  due,  the  whole 
sum  should  be  immediately  due.  The  holder  would  have  his 
election  in  such  a  case  to  sue  for  the  instalment  alone  or  for  the 
whole  sum,  each  claim  sued  upon,  it  seems,  now  requiring  pre- 
sentment, so  far  as  indorsers  are  concerned,  on  the  same  day,  the 
last  day  of  grace. 

The  Statute  abolishes  grace  on  negotiable  instruments  alto- 
gether ;  every  negotiable  instrument  is  by  its  language  '  payable 
at  the  time  fixed  therein,  without  grace.'  If  maturity  would 
fall  upon  Sunday  or  a  holiday,  the  instrument  is  payable  on  the 
next  succeeding  business  day.  And  a  special  provision  is  made 
by  the  New  York  Statute  in  regard  to  instruments  falling  due 
on  Saturday,  to  wit,  that  they  are  to  be  presented  for  payment 
on  the  next  succeeding  business  day,  except  that  if  they  are  pay- 
able on  demand  the  holder  may,  at  his  election,  present  them 
for  payment  before  noon  on  Saturday  when  that  entire  day  is 
not  a  holiday.*  In  other  respects  the  rule  in  regard  to  common 
law  contracts  appears  to  govern.^ 

J  Capital  Bank  v.  American  Bank,  51  Neb.  707. 

2  It  is  of  course  only  when  the  last  day  of  grace  would  fall  on  a  holiday 
that  grace  is  affected.     Bartlett  v.  Leathers,  84  Maine,  241. 

8  Oridge  v.  Sherborne,  11  Mees.  &  W.  374.  *  N.  I.  L.  §  92. 

*  Id.  §  93  :  '  Where  the  instrument  is  payable  at  a  fixed  period  after  date. 


118  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IX 

The  rule  in  regard  to  time  of  presentment  supposes,  however, 

that  there   is   no    legal  obstacle   to   presentment   at  maturity. 

,   ,       ,      Should  there  be  such  obstacle,  the  rule  yields,  and 
Legal  obstacle:  .  . «  .  , 

inevitable  acci-  the  law  in  most  cases,  if  not  in  all,^  suspends  the 

requirement  of  performance  of  the  duty  uutil  the 

removal    of    the    obstacle  ;  ^    then,    or    within    reasonable    time 

thereafter,   presentment  must  be  made.^ 

What  is  a  'legal  obstacle,'  within  the  meaning  of  this  rule  ? 
It  must  be  something  not  attributable  to  the  holder,  even  in  the 
way  of  mistake.^  Thus  the  holder  could  not,  by  way  of  justi- 
fying presentment  after  the  day  of  maturity,  show  that  he  had 
made  a  miscalculation  of  the  time  when  the  paper  became  due, 
or  that  he  had  confused  two  instruments  maturing  at  different 
times,  and  had  taken  the  wrong  one  for  the  one  in  suit,  or  that 
in  sending  the  paper  forward  to  the  place  of  payment  he  had 
made  a  mistake  in  the  address  which  caused  the  delay.  Mis- 
take by  the  holder  would  be  fatal. 

On  the  other  hand,  'inevitable  accident,'  to  use  a  common 
term,  would  be  a  legal  obstacle.  Accident,  as  thus  brought  in 
contrast  with  mistake,  is  some  unexpected  event  happening 
without  the  agency  direct  or  indirect  of  the  person  to  whom  it 
happens.  The  mistake  of  another  may  therefore  be  an  'acci- 
dent '  to  the  holder  ;  so  it  will  be  if  the  mistake  was  in  no 
proper  sense  due  to  the  holder,  —  it  is  then  '  inevitable  acci- 
dent, '  and  presentment  may  be  made  after  the  mistake  has  been 
corrected.  For  example :  The  defendants  are  indorsers  of  a  bill 
of  exchange  drawn  in  Norwich,  Connecticut,  on  A  in  Phila- 
delphia, Pennsylvania,  and  accepted  payable  at  a  certain  bank 

after  sight,  or  after  the  happening  of  a  specified  event,  the  time  of  payment  is 
determined  by  excluding  the  day  from  which  the  time  is  to  begin  to  run  and 
by  including  the  date  of  payment.' 

1  The  effect  of  the  death  of  the  maker  or  acceptor  is  disputed.  See  infra, 
p  120. 

2  Lindo  V.  Unsworth,  2  Camp.  602  ;  12  Rev.  Rep.  750 ;  Jewish  festival 
day,  requiring  Jews  to  abstain  from  secular  business,  held  sufficient  reason 
for  delay,  by  Lord  EUenborough. 

8  N.  I.  L.  §  120. 

*  Promptness  in  correcting  a  mistake,  so  as  to  make  the  result  the  samo 
as  if  no  mistake  had  been  made,  may,  it  seems,  be  shown.  Fielding  v. 
Corry,  1898,  1  Q.   B.  268,  as  to  time  of  notice  of  dishonor. 


Sect.  3.]  INDORSEE'S   CONTRACT.  ll'J 

there.  Shortly  before  the  maturity  of  the  bill  the  holder  sends 
it  to  a  baukiiig-house  in  New  York  City  for  collection.  Be- 
tween New  York  and  Philadelphia  there  are  two  mails  daily,  — 
one  leaving  New  York  at  9  a.m.,  the  other  at  4.30  v.  m.,  each 
due  at  Philadelphia  five  hours  after  starting.  On  the  morning 
before  the  day  of  maturity  the  cashier  of  the  collecting  bank  en- 
closes the  bill,  with  others,  in  a  letter  addressed  to  the  bank  at 
which  it  is  payable,  and  mails  the  letter  in  season  for  the  after- 
noon mail  of  that  day.  The  letter  is  duly  put  into  the  mail- 
bags,  which  leave  New  York  at  the  time  just  mentioned  ;  but 
by  mistake  of  employees  in  the  New  York  post-office  the  mail- 
bags  containing  letters  for  Philadelphia  are  directed  to  Wash- 
ington. They  are  carried  on  accordingly  to  Washington,  where 
the  mistake  is  discovered;  and  the  bags  are  now  sent  back  to 
Philadelphia,  reaching  that  city  on  the  day  after  the  maturity 
of  the  bill.  That  day  is  Sunday.  On  Monday  morning  the 
letter  containing  the  bill  in  question  is  delivered  to  the  bank  to 
which  it  is  addressed,  and  at  which  it  is  payable,  and  payment 
is  presently  refused.  Protest  and  notice  follow  directly.  The 
presentment  is  good,  inevitable  accident  having  prevented  the 
making  of  it  sooner.^ 

The  existence  at  maturity  of  war  between  the  countries  or 
States  in  which  the  holder  and  the  payor  respectively  reside 
would  be  another  legal  obstacle;  and  withholding  presentment 
or  attempts  to  make  presentment  until  the  end  of  the  war  would 
not  affect  the  liability  of  indorsers,  even  though  the  period  of 
limitation  (for  natural  cases)  might  have  expired.  But  within 
a  reasonable  time  after  the  end  of  the  war  presentment  should  be 
made,  on  pain  of  discharging  indorsers.^  What  time  would  be 
reasonable  would  in  a  case  of  doubt  be  for  the  jury ;  on  facts 
leaving  no  ground  for  doubt  in  the  matter,  the  court  would  rule. 
And  the  courts  would  probably  be  found  endeavoring  to  narrow 
the  region  of  doubt  wherever  they  could. 

A  similar  case  would  be  the  existence  of  an  epidemic  at  the 
place  of  payment,  resulting  in  quarantine;  and  it  would  not 
matter  whether  the  quarantine  was  general,  embracing  a  whole 

1  Windham  Bank  v.  Norton,  22  Conn.  213;  Cases,  132  ;  N.  I.  L.  §  120. 
a  Fanners'  Bank  v.  Gunnell,  26  Gratt.  131. 


120  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  1X1 

district,  or  a  whole  city,  or  limited  only  to  some  quarter  of  the 
city  in  which  the  paper  was  payable,  or  though  it  was  only  of 
the  house  where  it  was  payable. 

The  fact  that  the  maker  or  acceptor  was  dead  when  the  paper 
matured  might  of  course  create  a  legal  obstacle  to  presentment. 
In  the  first  place,  there  may  as  yet  be  no  executor  or  adminis- 
trator, of  whom  alone  payment  could  be  required.  In  such  a 
state  of  things,  one  of  two  things  must  be  true;  either  the  in- 
dorser's  contract  must  hold  good  meantime,  awaiting  the  (juali- 
fication  of  a  personal  representative,  or  presentment  must  be 
excused,  and  the  indorser's  liability  fixed,  by  taking  the  other 
steps.  In  some  States  the  latter  alternative  appears  to  be  ac- 
cepted ;  ^  probably  the  former  would  be  more  generally  accepted 
as  the  better  doctrine.^ 

In  the  next  place,  though  there  may  be  a  qualified  ex- 
ecutor or  administrator  at  the  maturity  of  the  paper,  still 
there  may  be  a  statutory  period  of  exemption  of  such  repre- 
sentation from  suits  (that  is,  from  duty  to  pay  demands 
against  the  estate),  which  may  not  yet  have  expired.  In 
such  a  case,  as  in  the  one  just  stated,  either  the  indorser's 
contract  must  hold  good  until  the  period  expires,  when  present- 
ment must  be  made,  or  presentment  must  be  excused,  and  the 
other  steps  taken.  The  latter  alternative  is  adopted  in  some 
States,  the  former  in  others.  For  example:  The  defendant  is 
indorser  of  a  promissory  note,  the  maker  of  which  is  dead  when 
it  matures.  An  administrator  has  been  appointed  and  has 
qualified.  He  is  exempted  by  law  from  suit  for  one  year  from 
the  time  of  qualification.  The  note  matures  a  month  after  his 
qualification.  No  presentment  by  the  law  of  Massachusetts  and 
of  other  States  is  necessary;  '  presentment  by  the  law  of  Mainp 
and  probably  of  other  States  is  necessary.* 

i  Hale  V.  Burr,  12  Mass.  86  ;  Oriental  Bank  v.  Blake,  22  Pick.  206*; 
Landry  v.  Stansberry,  10  La.  484.  >  ? 

2  Gower  f.  Moore,  25  Maine,  16. 

'  Hale  V.  Burr,  and  other  cases  in  note  1,  supra.  Query  if  notice  is  not 
necessary  under  this  rule  ?  See  the  statement  of  facts  in  Hale  v.  Burr  ;  and 
see  Oriental  Bank  v.  Blake,  32  Pick.  206,  holding  that  notice  to  an  adminis- 
trator of  an  indorser  is  necessary. 

*  Gower  v.  Moore,  25  Maine,  16. 


Sect.  3.]  INDORSER'S  CONTRACT.  121 

But  it  is  not  enough  that  presentment  is  made  on  the  day 
of  maturity  or  other  proper  day ;  it  must  be  made  at  a  reason- 
able time  of  that  day,  though  it  is  possible  that  the 

.      .  ^p         ,  ,  .  ^       .      ,      .        ,  .      Time  of  day. 

plaintiff  makes  out  his  case  presumptively  in  this 

respect,  if  the  paper  is  payable  generally,  by  showing  that  pre- 
sentment was  made  on  the  right  day. 

In  regard  to  time  of  day  a  distinction  like  that  heretofore 
noticed  between  paper  payable  at  bank  and  paper  not  payable 
at  bank  prevails.  If  the  paper  is  payable  at  bank,  or  at  any 
mercantile  house  having  fixed  hours  of  business,  presentment 
should  be  made  within  such  hours ;  to  make  it  before  or  after- 
wards would  be  of  no  avail  in  the  steps  to  fix  an  indorser's 
liability,  unless  indeed  the  bank  or  house  of  business  had  some 
one  at  hand  to  answer  calls  of  the  kind.^  It  is  common  in 
many  States,  but  not  in  all,  for  banks  to  have  some  one  of  its 
force  remain  for  a  time  after  the  close  of  banking  hours  for  such 
purpose  ;  presentment  accordinglj'^  would  be  good.^ 

The  case  is  different  if  the  maker,  drawer,  or  acceptor  has 
no  place  of  business  with  early  hours  of  closing;  but  the  ex- 
tremes of  the  time  prescribed  by  law  for  presentment  in  such 
cases  are  hard  to  fix.  It  is  common  to  say  of  cases  of  the  kind 
that  presentment  may  be  made  at  any  time  of  day  between 
morning  and  night.  But  when  does  '  morning  '  begin  and 
when  does  '  night '  end  within  the  meaning  of  the  statement  ? 
It  would  be  unreasonable  to  say  that  presentment  might  be 
made  at  any  time  between  the  beginning  of  day  and  midnight, 
and  the  law  does  not  say  so. 

Payment  should  be  called  for  only  when,  so  far  as  time  of 
day  is  concerned,  it  can  conveniently  be  made.  Hence  it 
should  not  be  called  for  during  the  hours  of  rest ;  that  is,  the 
hours  ordinarily  given  to  sleep,  as,  for  instance,  near  midnight. 
For  example :  The  defendant  is  indorser  of  a  promissory  note 
payable  at  no  place  designated.  In  the  night  of  the  day  of 
maturity,  between  eleven  and  twelve  o'clock,  the  holder  calls 
up  the  maker,  who  has  gone  to  bed,  and  presents  the  note  for 
payment,  which  is  refused,  and  notice  of  dishonor  given.  The 
presentment  is  not  good.^ 

*  See  Dana  v.  Sawyer,  22  Maine,  244.  *  Id.  »  Id. 


122  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  IX 

The  fact  that  the  maker  or  acceptor  may  have  retired  to  rest 
will  not  make  the  presentment  improper,  for  he  may  have  re- 
tired in  the  daytime,  or  in  the  edge  of  the  evening,  because  of 
illness,  fatigue,  or  anything  else.  The  only  question  on  this 
point  is  whether  the  presentment  was  made  at  a  reasonable 
time  of  day ;  that  question,  in  cases  in  which  there  is  serious 
ground  for  doubt,  will  and  should  ordinarily  be  left  to  the  jury. 
Still,  the  courts  are  inclined  to  push  back  the  borders  of  doubt 
as  far  as  they  can,  and  so  bring  the  case  within  the  domain 
of  certainty.  For  example  :  The  defendant  is  indorser  of  a 
promissory  note,  payable  at  no  designated  place,  and  due  in 
August.  The  maker  lives  in  the  country,  ten  miles  from 
Boston.  The  note  is  received  at  maturity  by  a  notary  public, 
after  the  close  of  banking  hours,  from  a  bank  in  Boston  which 
holds  it  for  collection,  the  bank  not  knowing  where  the  maker 
lives.  After  considerable  inquiry  the  maker's  place  of  residence 
is  ascertained,  and  the  notary,  informed  of  the  place,  goes  as 
soon  as  he  can  to  the  house,  arriving  there  about  nine  o'clock 
in  the  evening.  The  lights  of  the  house  are  out,  and  the  in- 
mates have  gone  to  bed  for  the  night.  The  notary  calls  the 
maker  up,  and  presents  the  note  for  payment,  and  payment  is 
refused.  The  presentment  is  good;  taking  into  consideration 
the  distance  of  the  maker  from  the  holder,  the  inquiry  made  to 
ascertain  the  maker's  place  of  residence,  and  the  season  of  the 
year,  the  time  of  presenting  the  note  was  reasonable.^  Again: 
Presentment  is  made  between  eight  and  nine  o'clock  at  the 
house  of  a  grocer.  The  house  is  shut,  and  no  one  is  there  to 
give  answer.     The  presentment  way  be  good.^ 

1  Farnsworth  v.  Allen,  4  Gray,  453.  'The  question  whether  a  present- 
ment is  within  reasonable  time  cannot  be  made  to  depend  on  the  private  ^nd 
peculiar  habits  of  the  makei'  of  a  note,  not  known  to  the  holder  ;  but  it  must 
be  determined  by  a  consideration  of  the  circumstances  which,  in  ordinary 
cases,  would  render  it  reasonable  or  otherwise.'     Id.,  Bigelow,  J. 

2  SeeTrign;s  v.  Newnham,  10  Moore,  249  ;  s.  c.  1  Car.  &  P.  631  ;  M'ilkins 
».  Jadis,  2  Barn.  &  Ad.  188;  Morgan  v.  Davison,  1  Stark.  114;  Barclay  v. 
Bailey,  2  Campb.  527.  The  rulings  on  presentment  appear  to  have  been 
positive  in  these  cases;  but  it  would  be  unsafe  to  say  in  general  that  present- 
ment in  such  a  case  would  be  good.  There  might  be  '  early  closing '  in  the 
trade,  and  no  good  reason  shown  for  not  making  presentment  at  the  place  of 
business  during  business  houi-s. 


Sect.  4.]  INDORSEE'S  CONTRACT.  123 

Similar  narrowing  of  the  borders  of  doubt  has  been  made  in 
regard  to  presentment  in  the  early  morning.  Thus  presentment 
upon  a  maker  at  his  place  of  residence  in  a  city  at  eight  o'clock 
in  the  morning  has  been  declared  too  early;  ^  while  presentment 
so  made  in  the  country,  at  a  farmer's  house,  would  ordinarily,  it 
seems,  be  reasonable. 

However,  rulings  upon  such  questions  are  not  of  the  same 
value  as  general  rules  of  law,  because  such  rulings  depend  so 
much  upon  the  particular  facts.  Facts  of  small  import  in 
themselves  often  become  important  in  cases  of  the  kind,  impor- 
tant enough  to  set  aside  the  application  of  the  ruling  in  ques- 
tion. The  ruling  is  particular,  not  general;  the  examples  above 
given  cannot  be  taken  to  apply  to  any  but  very  similar  cases. 
Their  chief  value  probably  lies  in  their  showing  a  disposition  of 
the  courts  to  extend  the  domain  of  law,  and  hence  of  certainty, 
as  far  as  possible. 

§  4.     Presentment,  by  Whom. 

Presentment  should  be  made  by  the  holder,  or  by  some  one 
authorized  to  receive  payment  on  his  behalf.^     According  to  the 
better  rule,  no  one  else   can  make  a  presentment  Presentment 
such  as,  if  refused,  can  be  treated  as  a  step  towards  entitled  to 
fixing  an  indorser's  liability.    Confusion  has  arisen  payment, 
from  the  fact  that  in  certain  cases  a  stranger  in  possession  of  the 
paper  may  make  presentment  for  the  purpose  of  receiving  'pay- 
ment ;  which  is  only  saying  that  payment  made  to  such  person 
may  operate  as  a  discharge  and  satisfaction  of  liability.     That 
-will  be  the  case  whenever  the  payment  is  made  in  good  faith, 
without  notice  that  the  holder  is  not  owner  of  the  paper,  and 
the  paper  surrendered  to  the  party  making  payment.     The  in- 
strument is  now  extinguished,  and  with  it  of  course  the  liability 
of  all  parties  to  it.' 

But  to  say  that  payment  may  be  made  to  a  person  not  entitled  1  ^-^^J,^ 
to  receive  payment  is  not  to  say  that  presentment  by  such  per-  ) 

J  Lunt  V.  Adams,  17  Maine,  230. 
2  N.  I.  L.  §  79. 

®  '  A  negotiable  instrument  is  discharged  by  payment  in  due  course  by  ot 
en  behalf  of  the  principal  debtor.'     N.  I.  L.  §  126. 


124 


BILLS,  NOTES,   AND   CHEQUES. 


[Chap,  IX. 


son  is  good  for  the  purpose  of  fixing  the  liability  of  an  indorser 
For  that  purpose  presentment  must  be  made  by  one  who,  in 
making  it,  is  acting  in  virtue  of  the  contract  of  the  defendant, 
and  who  further,  in  the  case  of  a  promissory  note  or  an  accepted 
bill  of  exchange,  can  compel  and  not  merely  receive  payment. 
The  indorsement  (or  the  drawing  of  bill  or  cheque)  is  an  order 
to  pay  to  the  true  holder;  obviously,  then,  none  but  the  true 
holder,  or  one  acting  on  his  behalf,  can  make  a  presentment 
that  shall  fulfil  the  terms  of  the  indorser's  contract.  If  pre- 
sentment be  good  when  made,  as  sometimes  it  is,  by  an  indoi-ser, 
it  is  good  because  the  indorser  is  (not  indorser,  but)  the  author- 
ized agent  of  the  holder. 

Upon  the  death  of  the  holder,  presentment  should  be  made 
by  his  successor  in  title,  that  is,  by  his  executor  or  adminis- 
Death  of  trator.     It  should  not  be  made  by  any  legatee,  for 

holder.  g^j^,]^  person,    though  entitled,  it  may  be,^  to  the 

money  when  paid,  could  not  require  payment ;  the  maker  or  ac- 
ceptor could  refuse  to  pay  to  any  one  but  the  legal  representative 
of  the  late  holder. 

It  matters  not  through  whose  hands  the  paper  passes  in 
making  presentment,  if  the  act  be  that  of  the  owner;  the  in- 
Intermediate  termediate  persons  are  only  his  instruments.  For 
persons.  example:  A  bill  of  exchange  is  sent  through  the 

post-office  to  the  acceptor  in  a  letter  demanding  payment,  and" 
is  received  on  the  day  of  maturity.  This  is  a  good  present- 
ment;* though  it  would  be  otherwise  of  a  mere  demand  of  pay- 
ment of  paper  not  sent  forward  or  lodged  in  the  bank  making^ 
demand. 

In  the  case  of  a  dishonored  foreign  bill  of  exchange  there  may 
be  a  double  presentment;  and  there  may  be  and  often  is  in  the, 
case  of  an  inland  bill  or  of  a  promissory  note.     The  first  pre- 

^  See  Crist  v.  Crist,  1  Carter  (Ind.),  570 ;  Cases,  78.  Perhaps  he  may  not 
be  entitled  to  receive  it  or  any  part  of  it,  though  it  was  given  to  him  by 
will  of  the  owner,  for  the  owner  may  have  been  involved  in  debt,  and  his 
estate  must  first  pay  the  creditors. 

«  Prideaux  v.  Criddle,  L.  R.  4  Q.  B.  455 ;  Hare  v.  Heaty,  10  C.  B.  N.  s.  65.. 


Sect.  4.]  INDORSEE'S  CONTRACT.  125 

seutment  is  made  by  the  holder  of  the  paper  or  by  his  agent, 
in  the  ordinary  way  ;  then  the  paper  must,  if  a  for-         .  . 

eign  bill,  viay  by  statute,^  if  an  inland  bill  or  a  inland  bills : 
note,  be  put  into  the  hands  of  a  notary  public  (or 
of  some  other  public  officer  or  respectable,  disinterested  person, 
by  the  unwritten  law,  if  no  notary  can  be  found  to  serve),  and 
presentment  made  by  him."  But  the  action  of  the  notary  so  far 
will  be  just  the  same,  as  regards  time  aud  place,  as  if  he  were 
holder. 

In  this  country  it  is  generally  laid  down  that  the  notary  must 
act  in  person,  in  the  absence  of  statute;  he  cannot  make  pre- 
sentment by  a  clerk  or  deputy.*  Indeed,  it  is  held  that  the  de- 
fect in  making  presentment  by  a  clerk  would  not  be  cured  by 
the  notary  himself  making  the  protest.*  Perhaps,  however,  cus- 
tom in  large  cities  may  be  deemed  to  sanction  the  act  of  a  dep- 
uty ;  that  is  the  case  iu  England.  It  is  not  improbable  that 
the  rule  requiring  personal  action  by  the  notary  was  due  to  a 
mere  slip  by  an  English  judge.'  In  the  case  of  inland  bills  and 
promissory  notes,  the  act  of  a  notary  is  not  required  at  all, 
tbeugh  it  is  generally  permitted  by  statute.® 

In  some  States  statute  authorizes  presentment  of  a  foreign 
bill  by  a  notary's  deputy,  and  in  some  States  by  a  justice  of  the 
peace.  And  where,  in  any  case,  no  notary  resides  or  will  act  in 
the  place  of  payment,  any  public  officer  may  act,  or  if  no  such 
person  is  at  hand  or  will  serve,  then  any  respectable,  disinter- 

'  N.  I.  L.  §§  125,  159,  and  by  earlier  statute  generally. 

'^  By  N.  I.  L.  §  161,  'protest  may  he  made  by  (1)  a  notary  public,  or 
(2)  by  any  respectable  resident  of  the  place  where  the  bill  is  dishonored,  in 
the  presence  of  two  or  more  credible  witnesses.'  In  giving  no  preference  to 
the  notary's  act,  this  changes  the  unwritten  law. 

3  Ocean  Bank  v.  Williams,  102  Mass.  141  ;  Donegan  v.  "Wood,  49  Ala.  242 ; 
Hunt  V.  Maybee,  3  Seld.  266  ;  Carter  v.  Union  Bank,  7  Humph.  548  ;  Smith 
V.  Gibbs,  2  Smedes  &  M.  479.     But  see  Nelson  v.  Fotterall,  7  Leigh,  179. 

*  Smith  V.  Gibbs,  supra. 

6  Buller,  J.,  in  Leftley  v.  Mills,  4  T.  R.  170.  See  1  Parsons,  Notes  and 
Bills,  641,  note. 

'  ^  Unless  the  employment  of  a  notary  is  permitted  by  statute,  notarial  fees 
cann^ot  be  collected  in  such  cases.  Burke  v.  McKay,  2  How.  66  ;  Union  Bank 
».  Hyde,  9  Wheat.  572  ;  City  Bank  v.  Cutter,  3  Pick.  4U. 


126  BILLS,  NOTES,  AND   CHEQUES.  [Chaf  IX 

ested  merchant  or  other  private  citizen.^     Witnesses  should  be 
present  in  such  a  case.*  \  a.  /  I  I 

§  5.    Presentment,  to  Whom. 

Presentment  may  of   course  be  made   either  to   the   maker, 

drawee,  or  acceptor  or  to  his  lawful  ageut;  or  according  to   the 

Statute,  if  the  party  primarily  liable  is  'absent  or  inaccessible  to 

any  person  found  at  the  place  where  the  presentment  is  made.'  '* 

In  case  of  such  person's  death  presentment  should  be  made,  if 

it  be  required  (concerning  which  see  the  remarks  in  the  preced- 

Death  of  maker  ^^E  section),   to  his   executor  or  administrator,   if 

or  acceptor.       ^jj^g   Yisl^    qualified   and    his    place   of   business    or 

^^   M.    residence  can    by    reasonable    diligence    be    found.*     If    no 

**"*>  ^*yone  has  qualified  as  executor  or  adminstrator,  or  if  the  exec- 

LCf^AT^^^     utor  or  administrator  cannot  be  found,  demand  perhaps  should 

rfieM"  H         ^^    made    upon  the  kindred  who  occupy    the  residence  of  the 

maker  or  acceptor  or  have   possession  of  his  property ;  but  such 

a  state  of  things  would  more   likely  be  held  to  dispense  with 

need  of  presentment,   at  least  for  the  time. 

The  mere  fact  that  the  maker  or  acceptor  has  become  bank- 
rupt will  not  affect  the  rule  in  regard  to  presentment,  for  a  man 
does  not  cease  to  own  or  control  his  property  simply  because  he 
is  not  able  to  pay  his  debts.  Much  less  does  he  cease  to  have 
friends  who  maj^  help  him,  especially  where  he  has  been  guilt- 
less in  his  misfortune.  But  if  an  assignee  of  his  estate  has 
been  appointed,  by  the  voluntary  act  of  the  maker  or  acceptor, 
or  by  the  law,  it  is  not  clear  that  presentment  should  not  be 
made  upon  the  assignee,  for  the  estate  may  have  proved  solvent ; 
though  it  appears  to  be  held  that  presentment  must  still  be 
made  upon  the  bankrupt.^ 

1  See  Burke  v.  McKay,  2  How.  66. 

'^  N.  I.  L.  §  161,  supra,  p.  125  ;  1  Parsons,  Notes  and  Bills,  633 ;  Chitty, 
Bills,  333,  9th  Eng.  ed.  ;  Bayley,  Bills,  c.  7,  §  2. 

3  N.  I.  L.  §  79,  4. 

«  N.  I.  L.  §  83;  Gower  v.  Moore,  25  Maine,  16. 

6  See  Nicholson  u.  Gouthit,  2  H.  Black,  609;  3  Rer.  Rep.  527;  Barton  e>. 
Baker,  1  Serg.  &  R.  334  (notice  of  dishonor). 


Sect.  5.]  INDORSER'S  CONTRACT.  127 

Where  a  promissory  note  is  made  by  one  who  signs  his  name 
as  'agent,'  without  disclosing  a  principal,  the  note,  as  we  have 
seen,  is  the  '  agent's '  own  undertaking  as  if  he  jjote  signed  bv 
were  principal.  Presentment  accordingly  should  one  as '  agent.' 
he  made  upon  him,  or  at  all  events  it  may  properly  he  made 
upon  him,  though  the  '  agency  '  he  real ;  indeed,  demand  may, 
it  seems,  be  made  upon  him  though  he  may  have  ceased  to  be 
agent  at  the  time  of  the  maturitj'^  of  the  note.^  If  the  name  of 
the  principal  were  given,  and  the  undertaking  made  his  under- 
taking, demand  could,  it  seems,  be  made  upon  either,  — upon 
the  agent,  provided  that  he  remained  such  till  maturity;  and 
upon  the  principal,  because  the  promise  in  reality  was  his 
promise.  It  would  not  be  necessary  to  make  presentment  to 
both,  even  though  the  promise  were  the  joint  promise  of  the  two, 
because  of  the  agency. 

Where  paper  is  made  or  accepted  by  two  or  more  person.-* 
jointly,  demand  must  by  the  better  rule  be  made  upon  both  or 
all,  unless  they  are  partners,  or  unless  some  other  Paper  signed 
agency  existed  between  them  in  respect  of  pay-  jo^ntYv  or  °^'^^ 
ment.^  If  they  are  partners,  or  one  of  them  is  severally, 
agent  for  the  rest,  presentment  will  be  sufficient,  where  no  place 
of  payment  is  specified,  if  made  upon  any  one  of  the  partners  or 
upon  the  agent.^  Upon  the  death  of  one  of  the  joint  makers 
or  acceptors,  presentment  to  the  survivors  will,  it  seems,  be 
sufficient;  clearly  that  would  be  the  case  where  they  were 
partners. 

If  the  makers  or  acceptors  are  severally  bound,  presentment 
made  to  any  one  of  them  will  be  sufficient  to  bind  parties  con- 
ditionally liable,  for  the  promise  is  the  individual  promise  of 
each,  as  much  as  if  the  others  had  not  promised.  And  this  is 
true  as  well  of  a  'joint  and  several'  undertaking  as  of  a  several 

1  Hall  V.  Bradbury,  40  Conn.  32. 

2  Arnold  v.  Dresser,  8  Allen,  435  ;  Union  Bank  v.  Willis,  supra;  Bank  of 
Red  Oak  v.  Orvis,  40  Iowa,  332  ;  Willis  i;.  Green,  5  Hill,  232  ;  Gates  v. 
Beecher,  60  N.  Y.  518,  denying  Harris  v.  Clark,  10  Ohio,  5.  See  also  Green- 
ongh  V.  Smead,  3  Ohio  St.  415. 

3  Gates  V.  Beecher,  supra  ;  N.  I.  L.  §  84,  '  even  though  there  has  been  a 
dissolution  of  the  firm.' 


128  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  IX. 

one  merely;  for  the  meaning  of  the  engagement   is   that  the 

parties  promise  in   two  distinct,  not  inseparable,   ways :  they 

promise  jointly  and  they  promise  separately;  that  is,  they  are 
bound  in  either  way.^ 

1  It  was  a  mere  slip  of  the  court  in  Union  Bank  v.  Willis,  8  Met.  504, 
at  the  end,  to  say  that  the  contract  in  that  case  was  joint  and  several ;  the 
decisiou  reached  required  the  court  to  hold  the  contract  joint  only. 


SiiCT.  1.]  INDORSEE'S   CONTRACT.  129 


Proxest 


CHAPTER  X. 

INDORSEE'S  CONTRACT  CONTINUED:  PROCEEDINGS 

UPON  DISHONOR. 

§  1.     Protest. 

By  the  law  merchant,  unwritten  and  written,  the  first  step  hfufm  ft 
necessary  after  the  dishonor  of  a  foreigti  bill  of  exchange  —  a  ptf«.^c 
step  common  and  by  statute  permissible,  but  not  TA* 

necessary,  in  the  case  of  inland  bills,  promissory  hti 

notes,  and  cheques  —  is  protest.^  This  is  a  highly  characteristic 
step,  taken  in  ordinary  cases  only  by  a  public  officer  called  a 
notary  public  ;  though  the  Statute  permits  the  protesting  of  bills 
of  exchange  by  '  any  respectable  resident  of  the  place  where  the 
bill  is  dishonored,'  ^  while  silent  in  regard  to  promissory  notes.* 
A  notary  public  is  an  officer  of  international  character,  or  at  all 
events  having  international  (and  interstate)  functions,  and  rec- 
ognized the  world  over.  And  it  is  because  the  bill  of  exchange 
is  a  foreign  instrument  that  the  services  of  a  notary  are  required, 
if  obtainable.* 

Protest  is  manifested  by  a  formal  certificate  annexed  to  the 
bill  or  a  copy  of  it,  ^  in  writing  under  seal,  of  a  notary,  or  of  some 
one  taking  the  place  of  a  notary,  by  which  he  attests  jj^,^  protest  is 
the  dishonor  of  the  dishonored  paper.  The  step  is  ™ade. 
wholly  distinct  and  separate  from  presentment  or  any  of  the 
other  steps  necessary  to  fix  an  indorser's  liability,  though  it  is 
dependent  for  its  validity  upon  due  presentment. 

^  N.  I.  L.  §§  125,  159.  See  also  §  164.  Protest,  '  to  bear  public  witness, 
declare  solemnly.'  ^  Fro,  publicly,  and  testare,  to  bear  witness.'  Skeat's  Ety- 
mological Diet. 

2  N.  I.  L.  §  161.  8  Probably  an  oversight 

*  When  the  services  of  a  notary  may  be  performed  by  another,  see  ante,       . 
p.  125. 

6  N.  I.  L.  §  160. 


130  BILLS,  NOTES,  AND   CHEQUES.  [Chap.X. 

Neither  the  law  merchant  nor  statute  has  prescribed  any  form 
of  words  to  be  used  in  the  certificate  of  protest  ;  but  the  law 
merchant,  touching  foreign  bills,  does  require  that  certain  facts 
should  appear  in  it,  in  order  to  make  it  valid.'  These  facts  are 
the  several  ones  going  to  show  dishonor  ;  to  wit,  due  present- 
ment, demand,  and  refusal,  or  an  equivalent,  or  a  sufficient 
excuse  for  omission.^  This  requires  that  the  certificate  should 
state  time  and  place  ^  of  presentment,*  and  in  principle  the  per- 
son or  persons  to  whom  presentment  was  made.^  Thus,  in  regard 
to  persons,  if  the  bill  has  been  accepted  by  more  than  one  the 
certificate  should  state  that  presentment  was  made  to  all,  or 
should  state  why  it  was  not,  as,  for  example,  that  the  acceptors, 
being  A  and  B,  were  partners,  and  that  presentment  was  made 
to  A.®  It  will  not  suffice  for  the  certificate  to  recite  that  '  due 
presentment '  was  made  ;  that  would  be  but  inference,  where, 
because  the  bill  is  a  foreign  international  instrument,  facti 
should  appear. 

The  rule  of  the  law  merchant  is  thus  exacting  because  by  that 
law  the  certificate  of  protest  of  a  foreign  bill,  if  the  certificate  is 
Protest  of  for-  ^^  existence  and  obtainable,  is  the  only  evidence  of 
eign  bills.  the  dishonor  of  the  bill.     The  drawer,  or  at  least 

some  of  the  parties  secondarily  liable,  live  in  another  state  or 

1  N.  L  L.  §  160. 

2  See  Staniback  v.  Bank  of  Virginia,  11  Gratt.  260  ;  People's  Bank  v. 
Brooke,  31  Md.  7  ;  Farmers'  Bank  v.  Allen,  18  Md.  475  ;  Walmsley  v.  Acton, 
44  Barb.  312 ;  Miisson  v.  Lake,  4  How.  262. 

^  If  the  instrnment  is  payable  at  bank,  it  should,  it  is  lield,  show  present- 
ment there  (where  the  holder  stands  on  the  certificate  alone)  ;  it  is  not  enough 
that  it  states  that  the  bill  was  presented  to  the  cashier.  Peabody  Co.  v.  Wil- 
son, 29  W.  Va.  528. 

*  N.  I.  L.  §160,  1. 

^  This  is  not  stated  by  the  Statute,  but  is  perhaps  to  be  inferred  from  the 
statement  that  the  protest  must  '  specify '  the  demand  and  answer,  if  any,  '  or 
the  fact  that  the  drawee  or  acceptor  could  not  be  found.'  §  157,  4.  The  rule 
is  plain  in  point  of  principle,  where  the  holder  rests  his  case  upon  the  certifir 
cate  ;  the  certificate  should  then  ])lainly  make  a  case  of  dishonor.  But  see 
Douglas  V.  Bank,  97  Tenn.  133,  holding  that  the  certificate  need  not  state  tho 
persons  on  whom  demand  was  made  if  the  demand  was  made  at  the  pince 
ilesignated  for  payment. 

*  Otsego  Bank  c.  Warren,  18  Barb,  290 ;  Nave  v.  Richardson,  36  Mo.  130. 


Rkct.  1.]  '^  roDORSER'S  CONTRACT.  '^     •^         131       f^*-»" 


Rkct.  1.] 

countrj',  presumptively,  from  that  of  the  drawee,  and  hence 
are  entitled  to  know  authoritatively  that  the  dishonor  has  been 
real,  such  as  to  justify  the  steps  by  which  their  liability  is 
fixed  and  made  absolute.  The  notarial  certificate  of  tlie  protest 
of  2^  foreign  bill  is  treated  as  a  sort  of  international  document, 
and,  it  seems,  stands  or  falls  by  itself  ;  its  deficiencies,  if  there 
he  any,  probably  cannot  be  made  good  by  evidence  from  with- 
out, however  clear  the  facts  may  be,  and  whether  the  protest  be 
for  non-acceptance  or  non-payment.'  On  tlie  other  hand,  being 
such  a  document,  it  is  more  readily  received  in  the  courts  than 
other  written  instruments.  The  genuineness  of  the  notary's  sig- 
nature need  not  be  proved  ;  his  seal  proves  that.  But  evidence 
would  be  admitted,  of  course,  that  the  seal  was  not  geimine,  and 
so  that  the  whole  certificate  was  fraudulent. 

Nor  indeed  are  the  statements  made  in  the  certificate  con- 
clusive evidence,'-^  though  they  ought  to  be  taken  as  strong 
evidence,  and  not  so  easily  overturned  as  ordinary  evidence. 
And  in  the  case  of  a  foreign  bill  the  certificate  is  treated,  like 
other  written  evidence  of  a  transaction,  within  the  general  rule 
concerning  the  'best'  evidence;  if  the  certificate  exists,  and 
can  be  produced,  it  must  be  produced  to  prove  the  dishonor;  if  it 
does  not  exist  or  cannot  be  produced,  other  evidence  of  dishonor 
is  admissible,  though  proof  must  be  furnished  that  the  bill  was 
in  fact  protested,  or  a  sufficient  excuse  shown  if  it  was  not. ' 
The  object  of  the  certificate  being  merely  to  furnish  eyidkiijce  of 
sufficient  dishonor,  its  statements  oj[  other  facts,yjf  suchtnere 
be,   cannot  be  received.  Q-  •  4  ')c<rC4-<^ 

The  States  of  the  American  Union,  it  should  be  remembered, 
are  foreign  to  each  other  for  the  purposes  of  the  law  under 
consideration.' 

*  See  Ocean  Bank  v.  Williams,  102  Mass.  141  ;  Bucknery.  Finley,  2  Peters, 
586  ;  Orr  v.  Maginnis,  7  East,  359.  This  appears  to  follow  from  the  fact  that 
the  protest,  that  is,  the  certificata,  is  necessary,  in  the  case  of  a  foreign  bill,  to 
prove  the  dishonor  of  the  instrument.  The  certiticate  can  no  doubt  be  amended 
by  the  notary  before  it  is  offered  in  evidence  ;  but  once  it  is  offered  in  evidence, 
the  die  is  cast.     Secus,  if  the  instrument  be  an  inland  bill,  a  note,  or  a  cheque. 

■^  Spence  v.  Crockett,  5  Bait.  576;  Ricketts  r.  Pendleton,  14  Md.  320. 

3  Bank  of  United  States  v.  Daniel,  12  Peters,  32,  54;  Commercial  Buik 
V.  Vamum,  49  N.  Y.  269. 


132  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

Tlius  far  of.  foreign  bills.  Of  tlie  protest  of  inland  bills  and 
notes  and  cheques  the  unwritten  law  merchant  knows  nothing; 
Protest  of  in-  ^'^d  hence,  so  far  as  the  protest  of  such  paper  is 
land  bills,  etc.  proper,  it  must  stand  on  statute.^  Statute  in 
many  States  does  authorize  it.^  But  statute  has  not  put  the 
protest  of  paper  of  the  kind  on  the  footing  of  the  protest  of 
foreign  bills ;  it  only  authorizes  or  permits  the  protest.  The 
protest  of  an  inland  bill  or  of  a  promissory  note  is  not  then  an 
act  of  the  high  character  of  the  protest  of  a  foreign  bill.  The 
certificate  is  not  to  be  rejected  because  it  does  not  contain  all 
that  would  be  necessary  to  show  due  protest  under  the  law  mer- 
chant; it  is  evidence  of  dishonor  as  far  as  it  goes,  —  its  defi- 
ciencies may  be  supplied  by  external  evidence.^  Probably  it 
might  be  laid  aside  altogether,  and  the  facts  relating  to  dis- 
honor proved  as  if  there  had  been  no  protest.  At  best  it  ought 
not  to  be  received  to  prove  anything  except  the  dishonor,  unless . 
.statute  give  it  greater  fojce,  as  it  generally  does.  47f*%  *4i»^tv**««^ 


^/^;7^;^~^^r<'^e4>»^T-c  CU^-f   hfl§u  ^m^  #«*«-v*£Mrw*]|^^A-i 

^^JL^     §gj^  1^^^  ^'Ct  of  the  notary  or  other  in  making  the   presentmeiu~~ 
^*^***^       must,   as  has  already  been    stated,   take   place   on   the  day  of 

fy"*^*""*'^*"**''^  I  City  Bank  v.  Cutter,  3  Pick.  414;  Union  Bank  v.  Hyde,  6  Wheat.  572  ; 
jf^-^^Jj  dU^ichons  0.  Webb,  8  Wheat.  326;  Kirtland  v.  Wauzer,  2  Duer,  278.  *  Where 
-i-  ia^^a  bill  does  not  appear  on  its  face  to  be  a  foreign  bill,  protest  thereof  in  case  of 
^••^•**  rTiIishonor  is  unnecessary.'  N.  L  L.  §  159.  Notes  and  cheques  are  not  men- 
f^^  •Jl^.^Cf*  tioned  by  the  Statute,  and  hence  are  left  to  the  unwritten  law  or  to  any 
■  »  special  legislation  touching  protest.  By  the  unwritten  law  merchant  accord- 
.i/l^ HM'**XPingly  protest  of  inland  bills,  notes,  and  cheques  is  no  evidence  of  dishonor. 

"■"'*  Gorbin  v.  Planters'  Bank,  87  Va.  661. 

^^    t^^^  9     "  Hence,  apart  from  statute  the  protest  of  an  inland  bill  or  a  promissory 

•*        W  ^ote  is  no  evidence  of  any  of  the  facts  stated,  unless  the  notary  has  deceased. 

•0^4  iJi  iM^^Tlffliiill    V.  Webb,  and  Kirtland  v.  Wanzer,  supra;  Carter  v.  Burley,  9  N.  H. 

»        y  558.     But  see  Seymour  V.  Brainerd,  66  Vt.  320;  Colms  v.  Bank  of  Tennessee, 

^^_^\       4  Baxt.  422.     As  to  the  effect  of  statute  making  protest  of  such  instruments 

0.  i^  YJi  evidence  of  what  it  states,  see  Linkhous  v.  Hale,  27  Gratt.  669 ;  Peabody  Co. 

^A_^j>-  V.  Wilson,  29  W.  Va.    528  ;  Legg  v.    Vinal,  165  Mass.    555.     The  last  case 

'  *A*^  Wwo  holds,  amidst  some    conflict  of  authority,  that  the  certificate  of  protest  of  a 

9jf^  promissory  note  need  not  state  that  the  place  to  which  notice  of  dishonor  is 

sent  by  mail  is  the  indorser's  true  residence  or  address ;  that  is,  even  when 

^  ffvT^*         til®  holder  stands  upon  the  certificate  alone. 

.  ^^  •  3  Wetherall  v.  Clagett,  28  Md.  465  ;  Seneca  Bank  v.  Neass,  5  Denio,  329 ; 

\  IMMtf  Magoun  v.  Walker,  49  Maine,  419. 


Sect.  2.]  INDORSEE'S  CONTRACT.  133 

maturity  of  the  paper.  The  formal  certificate  of  protest,  whether 
of  a  foreign  bill  or  of  other  paper,  need  not,  how-  Time  of  pro- 
ever,  be  made,  and  commonly  is  not  made,  at  the  t^®*  • '  noting.' 
time;^  it  may  be  made  at  any  subsequent  time  down  to  the 
time  of  suit.^  But  if  the  full  certificate  is  not  made  out  at 
the  time  of  the  dishonor,  what  is  called  a  '  noting '  should  then, 
or  at  all  events  before  the  following  day,  be  made;  ^  otherwise 
it  seems  that  a  certificate  afterwards  written  out  will  be  invalid.* 
Noting  consists  in  the  making  of  minutes  in  brief  of  the  facts 
to  be  stated  in  the  certificate.  The  noting  is  not  the  protest; 
but  if  the  notary  should  die  before  writing  out  the  certificate  the 
noting  may  take  its  place  if  it  is,  or,  on  explanation  by  one  who 
understands  it  becomes,  intelligible.  So  if  the  certificate  should 
be  lost  or  destroyed  without  the  holder's  consent. 

If  protested,  the  instrument,  at  least  in  the  case  of  a  bill  of 
exchange,®  must  be  protested  at  the  place  where  it  was  dis- 
honored; except  that  when  a  bill  drawn  payable  at  the  place  of 
business  or  residence  of  some  one  not  the  drawee  has  been  dis- 
honored by  non-acceptance,  it  is  to  be  protested  for  non-payment 
at  the  place  where  it  is  expressed  to  be  payable.  No  further 
presentment  on  the  drawee  in  that  case  is  necessary.®  Protest 
of  a  bill  lost,  destroyed,  or  wrongly  detained  from  the  person 
entitled  to  it,  may  be  made  on  a  copy  or  written  particulars.'' 

§  2.     Notice  of  Dishonor:    Form.^*'"'* 

The  next  and  last  step  to  be  taken  after  protest,  and  where 
protest  is  not  necessary  and  is  not  made,  the  next  and  last  step 


after  dishonor,  is  notice  of  the  dishonor.      Like  pre- 


Notice  pre- 


sentment,  that__^ep„^is^re(juired    of   all    pa])er  in  sumptively 
fix  ingtheli  ability  of  an  indorseri  that  step  or.  an  "*^^^^®*'7- 
equivalent  or  a  substitute,  unless  there  be  an  excuse.®     Knowl- 

1  N.  I.  L.  §  162. 

'■^  Bailey  v.  Dozier,  6  How.  23  ;  Dennistown  v.  Stewart,  17  How.  606,  607. 

3  See  same  eases. 

*  Tassel  V.  Lewis,  Ld.  Raym.  743.     See  Leftley  v.  Mills,  4  T.  R.  170,  174. 

*  N.  I.  L.  §  163.     There  ajipears  to  be  no  ground  for  any  distinction. 
6  Id.  "  Id.  §  167. 

*  Id.  §  96.     In  regard  to  fixing  the  liability  of  the  drawer  of  a  cheque,  see 
ante,  pp.  75-79. 


134  BILLS,  NOTES,  AND    CHEQUES  [Chap.  X 

edge  of  dishonor  is  not  enough;  the  law  requires  the  giving  oi 

notice,  so  as  to  apprise  the  indorser  whether  the  holder  looks  to 

hira  for  payment.^ 

The  law  merchant  has  not  prescribed  any  set  of  words  to  be 

used  in  the  notice;  here,  as  in  other  cases,  it  is  satisfied  if  its 

requirements   are   met    in    substance.      It    may   bn 

Form  of  notice.         .  ,n-,.-,  •,  ->        ,  i        •         i« 

written  or  oral;  ^  if  written  it  need  not  be  signed;  • 

if   written   notice   is  defective,   it  may  be  supplemented  orally 

(within  time).*     The  act  to  be  performed  is  indeed  less  formal 

and  more  simple,  and  the  law  merchant  is  much  less  exacting, 

than   in   the   matter  of  protest;    just  how   much   is  required  to 

make    notice  of    dishonor    good    is  a  question  upon   which  the 

authorities    in   certain   particulars    are    in    conflict.       What   is 

agreed  may  first  be  stated. 

The  law  merchant  requires  tbat  the  indorser  should  be 
ap])rised  of  the  paper  dishonored;  ^  but  it  is  not  exacting  in  the 
matter ;  if  the  indorser  is  correctly  informed  what  instrument 
is  dishonored,  it  matters  not  that  there  may  be  a  mistake  in  the 
description  or  reference.®  For  example:  The  defendant  is  in- 
dorser of  a  promissory  note,  which  on  due  presentment  has  been 
dishonored.  The  note  is  dated  '20th  July,  1819, '  and  pa3'able 
at  the  Bank  of  the  United  States,  Chilicothe,  Ohio.  A  written 
notice  of  dishonor  is  sent  to  the  defendant,  in  which  the  note  is 
described  at  length  and  stated  to  be  '  dated  20th  day  of  Septem- 
ber, 1819';  the  holder's  name  is  not  stated;  in  other  respects 
the  description  is  correct,  and  the  notice  proper.  There  is  no 
other  note,  of  which  the  defendant  is  indorser,  payable  at  the 
bank  named.  The  notice  is  good;  the  mistake  of  date  not 
being,  under  the  circumstances,  misleading,  and  the  omission  of 
the  holder's  name  being  immaterial.'  Again:  The  defendant 
is  indorser  of  a  dishonored  promissory  note  for  $1400.  The 
notice  of  dishonor  in  describing  the  note  erroneously  states  the 

1  Bank  of  Old  Dominion  v.  McVeigh,  29  Gratt.  546  ;  s.  c.  26  Gratt.  785, 
852;  Juniata  Bank  v.  Hale,  16  Serg.  &  R.  157  ;  Magruder  v.  Union  Bank, 
3  Peters,  87  ;  s.  c.  7  Peters,  287. 

^  N.  L  L.  §  103.  3  Id.  §  102.  «  Id. 

6  Dodson  V.  Taylor,  56  N.  J.  11.  *  N.  L  L.  §  102. 

'  Mills  V.  Bank  of  United  States,  11  Wheat.  431. 


Sect.  2.]  INDORSEU'S   CONTRACT.  135 

sum  payable  to  be  $1457,  but  otherwise  the  description  is  cor- 
rect, and  there  is  no  other  note  signed  by  the  person  named  iu 
the  notice,  and  indorsed  by  the  defendant.  The  notice  is 
good.' 

The  law  mercliant  does,  however,  require  that  the  notice  shall 
apprise  the  indorser,  with  reasonable  certainty,  of  the  paper  in 
question ;  a  mistake  which  might  well  be  mislead-  Mistake  in  the 
ing  will  be  fatal,  at  least  if  in  fact  it  did  mislead  ""t'ce. 
the, indorser.  Perhaps  if  he  knew  what  paper  was  meant,  the 
notice  would  be  good,  for  although  knowledge  of  dishonor  is 
not  notice,  notice  may  perhaps  be  supplemented  and  helped  by 
knowledge ;  the  rule  that  knowledge  in  such  a  case  is  not  what 
the  law  merchant  intends  by  '  notice  '  being  applicable  perhaps 
only  to  cases  in  which  no  notice  at  all  is  given. 

We  have  now  reached  a  difficulty.  Does  the  law  merchant 
require  that  the  notice  itself  shall,  expressly  or  by  certain  im- 
plication, inform  the  indorser  of  dishonor,  and  of  Notice  of  non- 
dishonor  at  maturity;  or  is  it  enough  that  the  paper  merely"  conflict 
was  in  point  of  fact  dishonored  at  maturity,  and  of  authority. 
that  notice  was  given  or  sent  at  the  proper  time?  Or  again, 
putting  it  specifically,  so  as  to  raise  the  concrete  question  upon 
which  the  American  courts  have  divided,  is  it  enough,  apart 
from  statute,^  for  the  holder  to  inform  the  indorser  that  the 
paper  indorsed  has  not  been  paid,  assuming  that  due  present- 
ment and  protest,  where  protest  is  necessary,  have  been 
made? 

This  question  has  usually,  if  not  always,  arisen  upon  written 
notice,  but  it  might  arise  upon  oral  notice.  In  a  case  of  oral 
notice,  however,  it  would  be  more  easy  to  show  that  the  indorsei- 
understood  the  notice  perfectly,  if  such  was  the  fact,  though 
the  language  actually  used  in  giving  the  information  might 
have  been  scanty,  so  much  so  as  to  be  insufficient  in  a  written 
notice.  For  in  a  case  of  oral  notice  the  parties  are  face  to  face, 
and  the  statement  of  the  holder  to  the  indorser  will  be  apt  to 
lead  to  conversation  or  to  conduct  making  it  clear  that   the 

1  Bank  of  Alexandria  r.  Swann,  9  Peters,  33. 

2  See  N.  I.  L.  §  103,  infra„ 


136  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

notice  was  well  understood  and  sufficient.  Such  cases  then 
may  be  dismissed  and  give  place  to  the  difficulties  arising  from 
the  language  of  written  notice,  where  the  parties  are  not  face  to 
face,  and  where  in  consequence  the  language  of  the  holder  may 
be  all  the  court  has  to  consider. 

The  course  of  the  English  authorities  on  this  point  has  had 
in***-*-^       80  much  influence  upon  our  own  courts  that  it  is  desirable  to 
call  special  attention  to  it;  that  will  give  us  the  real  explana- 


f^ 


l^^^-|^   '  tion  of  the  conflicts  in  American  authority. 

To  mention  cases  that  have  arisen  in  the  English  courts  only 
within  the  present  century,  the  following  especial!}^  deserve 
attention:  Notice  to  an  indorser  in  the  first  of  these  cases  in 
order  of  time  ran  :  '  I  am  desired  to  apply  to  you  for  the  pay- 
ment of  £150,  due  to  myself  on  a  draft  drawn  by  Mr.  Case, 
which  I  hope  you  will  on  receipt  discharge,  to  prevent  the 
necessity  of  law  proceedings,  which  otherwise  will  immediately 
take  place.'  That  was  held  not  good  notice,  on  the  ground 
that  it  was  no  more  than  a  demand  of  payment,  whereas  notice 
-)i  dishonor  was  deemed  necessary.^  In  a  later  and  very  famous 
jase,  in  the  Exchequer  Chamber,  the  predecessor  of  the  present 
English  Court  of  Appeal,  the  notice  ran:  'A  bill  of  £68.3 
drawn  by'  A,  upon  B,  'and  bearing  your  indorsement,  has 
been  put  into  our  hands  by  the  assignees  of '  C,  '  with  direc- 
tions to  take  measures  for  the  recovery  thereof,  unless  immedi- 
ately paid  to  '  the  signers  of  the  notice.  The  notice  was  held 
insufficient;^  it  being  considered  necessary  that  the  notice  'in 
express  terms  or  by  necessary  implication  '  should  assert  the 
dishonor  of  the  paper.      Afterwards,  in  another  case,  notice  that 

1  Hartley  v.  Case,  4  Barn.  &  C.  839.  The  notice  in  this  case  would 
probably  be  held  bad  even  under  the  rule  of  the  more  recent  English  cases 
referred  to  infra.  See  especially  Furze  v.  Sharwood,  2  Q.  B.  388,  where  the 
decision  is  declared  *  perfectly  correct.' 

2  Solarte  v.  Palmer,  7  Bing.  530  ;  s.  c.  1  Biug.  N.  C.  194.  In  this  case, 
which  has  been  much  discussed,  decided  as  it  was  in  the  Exchequer  Chamber, 
the  Lord  Chief  Justice  laid  down  the  following  rule:  '  The  notice  of  dishonor 
should  at  least  inform  the  party  to  whom  it  is  addressed,  either  in  express 
terms  or  by  necessary  implication,  that  the  bill  has  been  dishonored,  and  that 
the  holder  looks  to  him  for  payment  of  the  amount.' 


Sect.  2.]  INDORSEK'S   CONTRACT.  137 

*  the  bill  is  this  day  returned  with  chart/es'  was  held  sufficient 
by  the  Queen  s  Bench;  '  returned  with  charges'  implying  dis- 
honor.^ A  few  days  later  the  following  before  the  Commou 
Pleas  was  held  insufficient :  *  The  promissory  note  .  .  .  became 
due  yesterday,  and  is  returned  to  me  unpaid; '  it  did  not  disclose 
dishonor.^  '  Your  note  .  .  .  became  due  yesterday,  and  is  re- 
turned unpaid  .  .  .  with  Is.  6d.  for  noting '  in  another  and 
still  later  case  was  held  sufficient.^ 

Having  regard  to  the  different  forms  of  notice  themselves, 
the  decisions  in  these  cases  are  consistent  with  each  other;  and 
down  to  and  including  the  last  one  referred  to,  they  agree  iu 
the  proposition  that  the  notice  should  in  itself  be  a  notice  of 
.dishonor  J  But  the  court  in  the  last  case  took  exception  to  ttw" 
doctrine  of  the  more  celebrated  one,  that  it  ought  to  appear  iu 
the  notice  '  in  express  terms  or  by  necessary  implication, '  that 
the  paper  was  dishonored;  considering  it  'enough  if  it  appear 
by  reasonable  intendment,  and  would  be  inferred  by  any  man 
of  business,  that  the  bill  has  been  presented  to  the  acceptor, 
and  not  paid  by  him.'  *  And  later  judicial  opinion  in  England 
appears  to  conform  to  that  proposition.^ 

That  makes  the  notice  a  very  simple  thing;  its  legal  purpose 
being  satisfied  if  it  serve  to  warn  the  indorser  of  the  dishonor, 
in  legal  sense,*  so  that  he  may  take  steps  to  secure  himself,  if 

^  Grugeon  v.  Smith,  6  Ad.  &  E.  499.     See  Hedger  v.  Steavenson,  2  Mees» 
&  W.  799;  Furze  v.  Sharwood,  2  Q.  B.  388. 
2  Boulton  V.  Walsh,  3  Ring.  N.  C.  688. 

*  Hedger  v.  Steavenson,  2  Mees.  &  \V.  799. 

*  Boulton  i\  "Walsh,  supra,  was  overruled  in  Robson  v.  Curlewis,  Car.  & 
M.  378  ;  s.  c.  2  Q.  B.  421.  But  just  before  that  decision  came  Furze  v. 
Sharwood,  2  Q.  B.  388,  in  which  the  court  appear  to  have  leaned  towards  th« 
stricter  rule  in  Solarte  r.  Palmer,  saying,  however,  inter  alia  of  the  rule  ia 
Boulton  V.  Walsh,  '  Perhaps  it  goes  no  farther  than  to  require  that  the  court 
must  see  that,  by  some  words  or  other,  notice  of  dishonor  has  been  given.' 

5  Armstrong  v.  Christian!,  5  C.  B  687  ;  Everard  v.  Watson,  1  El.  &  B. 
801  ;  Paul  v.  Joel,  4  Hurl.  &  N.  355. 

'  There  is  dishonor  in  a  certain  sense  any  time  after  maturity,  if  the  in- 
strument has  not  been  paid  ;  but  the  dishonor  necessary  for  notice  is  of  courss 
dishonor  at  maturity.  Tliat  being  the  primary,  legal  sense  of  the  word,  notice 
which  in  terms  states  the  '  dishonor '  of  the  instrument  is  good  unless  facts 
sre  shown  to  invalidate  it. 


•138  BILLS,  NOTES,   AND   CHEQUES.  [Chap.  X 

possible,  against  prior  parties.    That  the  notice  was  justified  by 

due  presentment,  etc.,  is,  still,  a  matter  to  be  determined  on  the 

^evidence  at  the  trial,   if  suit  should  be   bi'ought,   and   not  an 

•  essential   feature  of  the   notice   itself.     Still,    the   notice  must 

•  notify  of  dishonor  either   in   terms  or   by   '  reasonable   intend- 
ment.'    The  result  is  this,  that  instead  of  the  rigid  requirement 

I  laid  down  in  the  Exchequer  Chamber  of  'necessary  implication' 
of  dishonor  in  the  notice,  where  the  fact  is  not  expressly  as- 
,  serted,  '  reasonable  intendment '  of  the  fact  is  held  sufficient  by 
;  the  later  authorities.  In  other  words,  the  difference  is  the  dif- 
iference  between  absolute  certainty  of  meaning  and  fair  natural 
meaning. 

Codification  of  the  English  law  of  bills  and  notes,  which  baa 
been  effected  since  these  decisions  were  made,  has  put  the  mat- 
ter thus :  Notice  of  dishonor,  the  Statute  declares,  '  may  be  given 
in  any  terms  which  sufficiently  identify  the  bill,  and  intimate 
that  the  bill  has  been  dishonored  by  non-acceptance  or  non-pay- 
ment.'-^  The  word  'intimate'  suggests  the  words  'reasonable 
.  intendment '  of  the  later  decisions  of  the  courts,  so  that  those 
decisions  appear  to  have  prevailed. 

Turning  now  to  the  American  cases,   we  find  the   Supreme 

Court  of  the  United  States  apparently  relaxing  the  requirement 

even  more  than  have  the  later  English  authorities. 
A_in6ric3,n  csiscs 
on  the  same        The  court  expressly  says  that  it  is  not  necessary 

question.  ^-^^^  notice  of  dishonor  should  state  that  payment 

was  demanded  at  maturity;  that  it  is  so  far  sufficient  if  bare 

■vnon-payment  is  stated;  and  that  whether  presentment  was  duly 

made  is   '  matter  of  evidence  to  be  established  at  the  trial.'  ^ 

'That  is,  there  need  be  no  assertion  or  intimation  of  dishonor 

in    the    notice    except    what    is    implied    in   sending    notice   of 

non-payment. 

;     But  as  that  doctrine  has  been  debated,  it  is  important  to  see 

what  in  fact  the  notice  stated.     The  instrument  was  a  promis- 

^  Bills  of  Exch.  Act,  §  49,  (5).  See  also  Benjamin's  Chalmers,  Bills,  Art. 
.199.  The  word  'bill'  in  the  Statute  is  intended  to  include  notes  and 
.  cheques. 

3  :ilills  V.  Bank  of  United  States,  11  Wheat.  431. 


Sect.  2.J  INDORSEE'S  CONTRACT.  139 

sory  note  payable  at  a  bank  in  Chilicothe,  Ohio.  The  notice, 
after  describing  the  instrument,  declares  that  it  'has  been  pro- 
tested for  non-payment,  and  the  holders  thereof  look  to  you.' 
And  the  court  remarks  that  the  practice  in  commercial  cities  is 
'not  to  state  in  the  notice  the  mode  or  place  of  demand,  but  the 
mere  naked  non-payment.'  In  certain  other  authorities  the  deci- 
sion has  been  interpreted  by  these  facts,  and  narrowed  accord- 
ingly, so  as  to  make  it  authority  for  some  such  proposition  only 
as  the  following:  Notice  of  non-payment  of  paper  payable  at  a 
bank  in  a  commercial  city,  construed  with  regard  to  the  prac- 
tice in  such  places,  means  notice  of  dishonor  at  maturity. 
'  The  distinction  is  thus  drawn,  which  has  already  been  noticed, 
between  paper  payable  at  bank  and  paper  payable  generally,  and 
then  the  case  is  based  more  or  less  upon  the  alleged  practice  in 
large  towns ;  so  that,  in  the  absence  of  such  facts  notice  of  non- 
payment would  be  insufficient,  though  prior  steps  had  been  duly 
taken.  And  accordingly  it  has  been  laid  down  that  the  dis- 
honor of  the  paper  should  appear  in  the  notice  expressly  or  '  by 
necessary  implication  or  reasonable  intendment.'  For  example: 
The  defendant  is  indorser  of  a  promissory  note,  payable  at  no 
place  stated,  which  is  dishonored  at  maturity.  Notice  directly 
is  sent  to  the  defendant  in  the  following  language:  'I  have 
a  note  signed  by  C  E  B  and  indorsed  by  you  for  $700,  which  is 
due  this  day  and  unpaid;  payment  is  demanded  of  you.'  The 
notice  is  deemed  bad;  the  statement  that  it  was  unpaid  not 
amounting  'by  necessary  implication  or  reasonable  intendment' 
to  an  intimation  that  demand  had  been  made  or  that  the  note 
had  been  in  any  way  dishonored.^ 

'The  decision  in  this  authority  appears  to  come  to  the  same 
result  as  that  reached  in  the  later  English  authorities,  upon 
which  indeed  it  is  chiefl}^  based.  The  matter  is  summed  up  by 
the  statement  of  the  Chief  Justice  that  '  mere  notice  of  non-pay- 
ment, which  does  not  express  or  imply  notice  of  dishonor,  is  not 
such  notice  as  will  render  the  indorser  liable.'  The  sufficiency 
of  the  notice  then  is  not  a  mere  '  matter  of  evidence  to  be  estab- 
lished at  the  trial.' 

Notice  of  dishonor  is   *  implied  '   or  conveyed  by  '  reasonably 

1  Gilbert  r.  Dciuus,  3  Met.  495. 


140  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

intendment,'  according  to  the  same  authority,  by  mere  state- 
ment of  non-payment,  '  where  the  paper  is  in  terms,  or  by  usage 
or  special  agreement,  payable  at  a  bank.'  Such  statement,  it  is 
said,  'is  equivalent  to  an  averment  that  it  is  dishonored.'  In 
other  cases  the  statement  of  non-payment  alone  is  not  such  an 
equivalent,  nor  does  it  imply  or  convey  by  reasonable  intend- 
ment the  dishonor  of  the  paper;  but  the  addition  of  a  single  word 
may  make  the  equivalent ;  adding  the  word  '  protested '  would 
plainly  imply  dishonor.^ 

The  explanation  of  the  difference  between  the  case  of  paper 
payable  at  bank  and  that  of  paper  not  payable  at  bank,  in  regard 
to  the  validity  of  a  notice  of  '  non-payment '  at  maturity,  lies  in 
a  fact  heretofore  stated.  Where  paper  is  payable  at  bank,  and 
lodged  or  presented  there  for  payment,-  presentment  in  the 
ordinary  way  —  by  exhibiting  the  j^aper  —  is  not  required;  the 
maker  or  acceptor  must  have  provided  funds  there  with  which 
to  pay,  and  if  he  has  not  done  so  it  only  remains  to  say  that  the 
note  has  not  been  paid,  to  show  or  to  indicate  the  dishonor.  For 
it  may  be  presumed  that  the  books  of  the  bank  have  been  exam- 
ined, if  necessary,  to  see  whether  funds  applicable  are  in  the 
bank. 

More  recently,  however,  it  has  been  held  in  another  State, 
that  notice  of  dishonor  is  not  necessary,  and  that  notice  of  non- 
payment is  enough  in  a,nj  case,  whether  the  paper  is  payable  at 
bank  or  not,  so  long  as  proper  steps  in  fact  have  already  been 
taken.  For  example:  The  defendant  is  indorser  of  a  promissory 
note  which  does  not  designate  any  place  of  payment.  The  note 
is  dishonored  at  maturity,  and  notice  is  sent  at  once  by  the 
holder  to  the  defendant,  stating  that  the  former  holds  a  '  note 
indorsed  by  you  and  not  paid  at  this  date,'  and  demands  pay- 
ment.    That  is  deemed  good  notice.' 

That  doctrine  proceeds  upon  the  ground  that  the  purpose  of 


1  1  Parsons,  Notes  &  Bills,  471,  citing  Crawford  v.  Branch  Bank,  7  Ala. 
205;  De  Wolf  v.  Murray,  2  Saudf.  166,  and  other  cases. 

2  If  the  instrument  is  not  lodged  in  or  presented  for  payment  at  the  bank 
at  which  it  is  payable,  of  course  there  is  no  presentment  (ante,  p.  108 J,  and 
hence  there  can  be  no  dishonor. 

*  Cromer  v.  Piatt,  37  Mich.  132,  Graves,  J.,  dis. 


Sect.  2.]  INDORSEE'S   CONTRACT.  141 

notice  of  dishonor  is  simply  to  warn  the  indorser  that   he  must 

be  jirepared  to  pay.     If,  according  to  such  doctrine,  the  indorser 

has  doubts  whether  the  warning  given  is  good,  let  him  inquire; 

and  doubts  he  may  have  as  well  where  the  steps  are  detailed  in 

the  notice  as  where  they  are  not;  he  is  neither  better  nor  worse 

off  by  bare  warning  of  non-payment,  so  far  as   the  real  facts  in  ___^ 

regard  to  the  steps  are  concerned.     But  the  weight  of  authority  1    Qiji^t^jiA 

appears  to  be  against  such  a  view  of  the  matter,  andjt^jpnst  on  1         — —- 

the  whole  be  said  that  the  notice  should  in  itself,  or  in  the  _cii:=_i^^^^^^ 

cumstances  attending  it^  hf  f\,  nntip.P  nf  dis^nor^  ^ ^ 

Authority  has  sometimes"  gone  ^TIl  further,  and  required  the 
notice  to  show  or  intimate  not  only  the  dishonor  of  the  paper, 
but  dishonor  of  it  at  maturity.  For  example:  The  defendant  is 
indorser  of  a  promissory  note,  payable  at  no  stated  place,  which 
is  dishonored  at  maturity.  The  holder  directly  notifies  the  de- 
fendant in  writing,  stating  that  the  note  has  been  'this  day  pre- 
sented for  payment  '  without  avail,  there  being  nothing  to  show 
that  'this  day'  was  the  day  of  maturity.  The  notice  is  deemed 
not  good.-     But  that  may  be  doubted. 

The  Statute  declares  the  notice  sufficient  if  it  'indicate  that* 

the  instrument  *  has  been  dishonored  by  uon-accept- 

, ,  *'  ^       The  Statute, 

ance  or  non-payment. 

Further,  the  notice  must,  generally  speaking,  apprise  the 
indorser  that  the  holder  looks  to  him  for  payment.  All  the 
authorities  agree  in  that  statement  as  a  general  indorser  looked 
proposition;*  but  there  has  been  some  question  of  to  for  payment, 
the  meaning  of  the  rule.  Does  the  rule  mean  that  there  should 
be  an  averment  in  the  notice  that  the  holder  looks  to  the  in- 
dorser for  payment  ?     But  implication  may  be  as  plain  as  asser- 

1  See  Clark  v.  Eldridge,  13  Met.  96 ;  Townsend  v.  Lorain  Bank,  2  Ohio  St. 
345,  355;  Ransom  v.  Mack,  2  Hill,  587  ;  Dole  v.  Gold,  5  Barb.  490  ;  Arnold 
w.  Kinloch,  50  Barb.  44;  Armstrong  y.  Thruston,  11  Md.  148,  157;  Lock- 
wood  V.  Crawford,  18  Conn.  361  ;  Page  v.  Gilbert,  60  Maine,  485. 

^  Wynn  v.  Alden,  4  Denio,  165.  See  also  Townsend  v.  Lorain  Bank, 
2  Ohio  St.  345  ;  Etting  v.  Schuylkill  Bank,  2  Barr,  355 ;  Routh  v.  Robertson, 
11  Smedes  &  M.  382.  But  see  Crocker  v.  Gatchell,  23  Maine,  392;  Ontario 
Bank  v.  Petrie,  3  Wend.  456,  overruled  in  Ransom  i;.  Mack,  2  Hill,  587,  595. 

»  N.  L  L.  §  108.  *  See  §  3,  infra. 


142  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  X. 

tion,  and  beyond  doubt  that  is  so  in  every  case  where  the  holder 
sends  notice  of  dishonor  ;  the  sending  "or  giving  of  the  notice 
has  no  meaning  in  such  a  case  unless  it  means  that  the  holder 
looks  to  the  party  notified  for  payment.  And  so  the  courts  do 
not  require  any  such  statement,  though  it  is  common  to  make 
one;  nor  perhaps  is  such  statement  necessary  in  notice  by  one , 
indorser,  though  not  the  holder,  to  another.  It  is  enough  cer- 
tainly that  the  notice  proceeds  from  the  holder  or  from  his  agent 
or  from  a  notary  employed  by  either. '^ 

§  3.     Notice,  by  Whom. 

Notice  of  dishonor  should  be  given  (ll^y  the  holder  or  by, 
his  authorized  agent,  or  (2)  by  an  indorser^legalTy  bound  to  pay. 
It  cannot  be  given,  so  as  to  have  legal  effect,  by  any  other  person; 
except,  of  course,  on  the  death   of   the  holder,  by  his  personal 
representative.      This  is  certainly  the  unwritten  law  merchant; 
and  it  probably  is  the  written   law  also,  though  the  written  law , 
uses  the  word  'may.'     The  Statute  declares  that  notice   mMy, 
be  given  by    or   on    behalf  of  the  holder,  or  by  or   on  behalf 
of  any  party  to  the  instrument  who  might  be  compelled  to  pay 
it  to  the  holder,  and  who,  upon  taking  it  up,  would  have  a  right, 
of  reimbursement  from  the  party  to  whom  the  notice  is  given.^ 
But  'may  '  no  doubt  means  must,  and  on  '  behalf  of,'  an  author- 
ized agent. 

A  stranger  then,  acting  without  due  authority,  cannot  give 
valid  notice  of  dishonor  ;  and  the  reason  makes  the  rule  sensible 
-J    .     ,  and  just,  —  an  unauthorized  stranger    cannot    ap- 

•tranger:  by       prise  the  indorser  of   what  he  is  entitled   to  know, 
to  wit,  that  the  holder  (or  other  party)  will  look' 
to  him  for  payment. 


s 


^  Bank  of  United  States  v.  Carneal,  2  Peters,  543  ;  Chanoine  v.  Fowler, 
3  Wend.  173;  Furze  v.  Sharwood,  2  Q.  B.  388.  In  the  latter  case  Lord 
Denman,  C.  J.,  said  :  'Where  notice  has  been  given  by  another  party  [i.  e.  an 
indorser]  than  the  holder,  there  may  be  good  sense  in  lequiring  that  it  shall 
be  accompanied  by  a  direct  demand  of  payment  or  a  statement  that  it  will  be 
required  of  the  party  addressed  ;  but  in  no  case  has  the  absence  of  such  infor- 
mation been  held  to  vitiate  a  notice  in  other  respects  complete,  and  which  haw 
come  directly  from  the  holder.* 

2  N.  L  L.  §  97.  '  Cases  in  note  1,  supra. 


Sect.  3.]  INDORSER'S   CONTRACT.  143 

For  the  same  reason  it  was  at  one  time  held  that  an  indorser 
who  was  not  the  holder  could  not  give  valid  notice,  in  his  own 
behalf;  he  could  not  inform  the  party  notified  that  the  holder 
would  look  to  him  for  [)ayment,  unless  he  was  authorized  by  the 
holder  to  act  for  him  ;  and  in  that  case  it  would  not  be  the  in- 
dorser's  notice.  But  the  contrary  rule,  arising  no  doubt  from' 
custom,  and  therefore  justifiable,  now  prevails.  # For  example: 


ising  no  cioub 
ails.  /For  exa 
lange^of  whit 


The  defendant  is  drawer  of   a  bill   of  exchange^of  which  the' 

plaintiff  is  an   indorser,  having  indorsed  it  in  favor  of  W  who 

had  discounted  and  so  purchased  the  bill.     On  discounting  the-  x.       ~L 

bill  W  left  it  with  the  plaintiff's  clerk,  with  instructions  to  him      "^^^ 

to  obtain  payment  or  give  notice  of  dishonor.     The  clerk  does 

give  such  notice  to  the  defendant  at  the   proper  time,  but  he 

gives  it,  not  in  the  name  of  W  but  in  the  name  of  the  plaintiff.-^' 

The  notice  is  good.'-^ 

But  though  an  indorser  whose  liability  has  been  fixed  may 
give  notice  for  his  own  benefit,  to  avail  him  in  case  he  should' 
afterwards  be  compelled  to  pay  or  should  pay  without  suit  —  for 
an  indorser  loses  none  of  his  rights  by  so  paying  after  his  lia- 
bility has  been  fixed;  —  can  the  indorser  give  notice  which  may 
avail  the  holder  or  any  intermediate  party  ?  Doubt  has  existed 
on  this  point  also,  because  an  indorser  as  such  is  not  an  agent 
for  the  holder  or  for  the  next  or  any  later  indorser. 

Clearly  the  mere  fact  that  an  indorser  has  given  notice  to  a 
prior  indorser  in  due  time  will  not  of  itself  avail  the  holder. 
But  if  the  notifying  indorser  has  authority  from  the  inurement  of 
holder  or  other  to  give  the  notice,  his  act  will  be  the  °o'^"=''- 
act  of  the  holder;  or  if,  not  having  authority  from  the  holder  or 
other,  his  own  liability  as  indorse^  has  been  duly  fixed,  notice 
given  by  him.  it^s  n^w  understood,  will  avail  the  holder  or 
intermediate  indorser  by  what  is  well  termed  inurement?     It 

1  The  case  therefore  stands  just  as  if  the  plaintiff  indorser  himself  gave  the 
notice. 

2  Chapman  v.  Keane,  3  Ad.  &  E.  193,  overruling  Tindal  v.  Brown,  1  T.  R. 
167  ;  s.  c.  2  T.  R.  186,  in  which  it  had  been  held  that  notice  should  come 
from  the  holder  or  his  agent,  so  as  to  apprise  the  party  notified  that  he  would 
be  looked  to  for  payment. 

*  N.  I.  L.  §  100  :  '  Where  notice  is  given  by  or  on  behalf  of  a  party  entitled 


144  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

is  necessary,  however,  that  the  liabilit}-  of  the  notifying  in- 
(Jorser  should  have  been  duly  fixed  (unless  by  reason  of  waiver 
it  was  already  absolute) ;  otherwise  the  indorser,  being  under  no 
liability,  is  a  mere  stranger.  For  example:  The  defendant  is 
indorser  of  a  bill  of  exchange,  subsequently  indorsed  by  A  to 
the  plaintiff.  The  bill  is  dishonored  at  maturity,  and  A  imme- 
diately gives  notice  to  the  defendant.  The  plaintiff  has  not 
given  notice  at  all,  and  has  not  authorized  A  to  give  notice  for 
him.  The  defendant  is  not  liable;  the  notice  by  A  not  inuring 
to  the  plaintiff's  benefit  because  A's  liability  has  not  been  fixed.^ 
Now  and  then  a  case  appears  to  give  sanction  to  a  doctrine 
that  the  acceptor  of  a   bill,  and,  by  parity  of   reasoning,  the 

maker  of  a  note,  may  give  notice  available  for  the 
Notice  by  ac-  o      -r^        ,  r  •     •  i  ..    ^ 

ceptor  or  holder.^     But  that,  so  far  as  it  is  to  be  accepted,  can 

™*^^'"'  only  be  explained  on  the  ground  that  the  acceptor 

or  maker  was  the  authorized  agent  of  the  holder  in  the  matter ; 

otherwise  the  doctrine  is  unsound.^     There  must  be  an  agency, 

if  the  notice  is  not  given  by  an  indorser,  at  the  time  of  giving 

the  notice,  and  in  the  act  of  giving  it.* 

to  give  notice,  it  inures  for  the  benefit  of  the  holder  and  all  parties  subsequent 
to  the  party  to  whom  notice  is  given.'  See  also  §§  99,  100,  of  the  Statute,  in 
regard  to  notice  by  the  holder  inuring  to  others.  '  The  plaintiff  insists  that 
the  notice  given  by  the  bank  shall  inure  to  his  benefit.  If  the  notice  had  been 
in  time  and  valid,  it  would  by  law  have  inured  to  his  benefit,'  etc.  Reese,  J., 
in  Simpson  v.  Turney,  5  Humph.  419.  It  should  be  observed  that  inure- 
ment is  not  agency. 

1  See  Lysaght  v.  Bryant,  9  C.  B.  46,  the  converse  case,  the  notifying  in- 
dorser having  been  duly  notified  by  the  holder  and  plaintiff.  '  It  seems  from 
the  cases  that  the  holder  of  a  bill  may  avail  himself  of  a  notice  given  in  due 
time  by  a  prior  indorser,  provided  he  himself  is  in  a  condition  to  sue  the  party 
by  whom  the  notice  was  given.'  Id.,  Cresswell,  J.  See  also  Harrison  v. 
Ruscoe,  15  Mees.  &  W.  231. 

2  Kosher  v.  Kieran,  4  Camp.  87;  Shaw  v.  Croft,  Chitty,  Bills,  494;  Douglas 
V.  Bank,  97  Tenn.  133,  that  notice  may  be  given  by  any  party. 

8  Bayley,  Bills,  254,  5th  ed.;  Thompson,  Bills,  359,  Wilson's  ed.  See 
Sebree  Bank  v.  Moreland,  96  Ky.  151. 

*  See  New  York  Co.  v.  Selma  Sav.  Bank,  51  Ala.  305. 


Sect.  4.]  INDORSEE'S   CONTRACT.  145 

§  4.     Notice,  to  Whom. 

Notice  may  be  sent  to  the  indorser  or  to  his  authorized  agent.* 
If  two  or  more  have  indorsed  the  paper  jointly,  notice  must  be 
sent  to  each  of  them,  if  by  due  diligence  that  can  j^.j^t indorsers. 
be  done ;  "^  unless  there  should  be  a  relation  of 
agency  between  them,  in  which  case  notice  to  the  one  who  is 
agent  will  be  sufficient  to  bind  all.^  If  there  is  no  agency,  notice 
to  part  of  the  number  would  not  bind  even  them,  since  they  are 
liable  only  with  the  rest.*  If  the  joint  indorsers  are  partners, 
notice  to  one  will  suffice,  as  each  partner  represents  the  firm.^ 

In  the  event  of  the  death  of  an  indorser  known  to  the  person 
to  give  notice,  notice  should  be  given  to  his  personal  represent- 
ative if  there  be  such,  and  the  representative  can  Death  of  in- 
with  reasonable  diligence  be  found.^  If  there  be  dowser, 
more  than  one  representative,  notice  to  one  of  them  is  notice  to 
all.'  But  even  though  there  should  be  no  personal  representa- 
tive of  the  deceased  indorser,  it  is  still  the  duty  of  the  holder  to 
exercise  reasonable  diligence  towards  informing  those  interested 
in  his  estate  of  the  dishonor  of  the  paper.^  It  has  accordingly 
been  held  that  if  notice  is  sent  to  the  last  place  of  residence  or 
of  business  of  the  indorse!-,  that  is  enough,  prima  facie,  to  fix 
the  liability  of  his  estate,  since  it  may  reasonably  be  assumed 
that  the  notice  will  reach  those  who  are  chiefly  interested.^     So 

3  N.  I.  L.  §  104. 

2  Id.  §  107  ;  State  Bank  v.  Slaughter,  7  Blackf.  133  ;  Reals  v.  Peck,  12 
Barb.  245  ;  Willis  v.  Green,  5  Hill,  232 ;  Miser  v.  Trovinger,  7  Ohio  St.  281. 

8  N.  I.  L.  §§  106,  107. 

*  Jarnagin  v.  Stratton,  95  Tenn.  619,  621,  treating  it  so  by  the  weight  of 
authority.  The  joint  contract  doctrine  of  the  common  law  has  been  tlirust 
upon  the  law  merchant  ;  but  there  is  no  escape  from  the  conclusion.    Ante,  p.  5. 

^  N.  I.  L.  §  106  ('even  though  there  has  been  a  dissolution')  ;  Gowan  !•. 
Jackson,  20  Johns.  176  ;  Bouldin  v.  Page,  24  Mo.  594. 
«  N.  I.  L.  §  105;  Dodson  v.  Taylor,  56  N.  J.  11. 
^  Beals  V.  Peck,  12  Barb.  245. 

*  Goodnow  V.  Warren,  122  Mass.  79.  It  seems  that  delay  for  the  appoint- 
ment of  a  personal  representative  of  the  deceased  indorser  would  not  bo  jo* 
tifiable.     Deininger  v.  Miller,  7  App.  Div.  N.  Y.  S.  C.  409. 

9  Id.  ;  Dodson  v.  Taylor,  56  N.  J.  11  ;  N.  I.  L   §  105. 

JO 


146  BILLS,  NOTES,  AND   CHEQUES.  I  Chap.  X. 

too  notice  may  be  sent  to  one  named  as  executor  in  the  will  of 
an  indorser,  though  the  person  named  has  not  qualified  ;  for  the 
fact  that  the  indorser  has  named  him  as  his  executor  is  enough 
to  indicate  that  he  will  take  an  interest  in  the  estate,  even 
though  he  should  decline  the  office,  and  inform  those  directly 
concerned.^  But  it  would  not  satisfy  the  law  to  send  notice  to 
a  person  afterwards  appointed  administrator,  not  being  a  person 
to  whom  the  estate  would  pass.^ 

Notice  to  the  personal  representative  should,  it  seems,  be  sent 
addressed  to  him  by  name,  if  his  name  can  be  ascertained  by 
reasonable  diligence,  and  not  '  to  the  executor '  or  '  adminis- 
trator' or  'personal  representatives'  of  the  indorser;  thougii 
notice  so  addressed  will  in  any  case  be  good  if  received  in  due 
time.^  On  the  death  of  a  partner,  in  the  case  of  partnership 
indorsement,  notice  should  be  given  to  the  survivor,^  and  also 
perhaps  to  the  personal  representative  of  the  deceased.^ 

If  a  party  secondarily  liable  has  been  adjudged  a  bankrupt  or 
an  insolvent,  or  has  made  an  assignment  for  his  creditors,  notice 
ma}'  be  given  either  to  the  party  himself  or  to  his  trustee  or 
assignee.® 

§  5.     Notice,  How. 

The  law  merchant  requires  that  the  indorser  shall  be  notified 
of  the  dishonor  with  reasonable  despatch  ;  and  hence  it  cannot 
Reasonable  ^6,  and  is  not  indifferent  to,  methods  of  giving 
despatch.  notice.     That  is  to  say,  the  presumably  more  direct 

and  expeditious  methoa  must  be  adopted,  unless  it  can  be  shown 
that  the  notice  reached  the  indorser,  notwithstanding  the  method 

1  Shoenberger  V.  Lancaster  Sav.  Inst,  28  Penn.  St.  459. 

2  Goodnow  V.  Warren,  122  Mass.  79;  Mathewson  v.  Strafford  Bank,  45 
N.  H.  104. 

3  Smalley  v.  Wright,  40  N.  .1.  471  ;  Linderraan  v.  Guldin,  34  Penn.  St.  54. 
*  Slocomb  V.  De  Lizardi,  21  La.  An.  355. 

s  Cocke  V.  Bank  of  Tennessee,  6  Hump.  51.  But  see  Dabney  v.  Stidger, 
4  Smedes  &  M.  749.  See  Hubbard  v.  Matthews,  54  N.  Y.  43.  But  see  N.  I.  L. 
§  105  :  '  Where  the  parties  to  be  notified  are  partners,  notice  to  any  one  part- 
ner is  notice  to  the  firm  even  though  there  has  been  a  dissolution.'  Does  this 
include  dissolution  by  the  death  of  a  partner  ? 

«  N.  I.  L.  §  108. 


Sect.  5.]  INDORSER'S   CONTRACT.  147 

used,  as  soon  as  it  would  have  done  had  the  metliod  preferred, iyj, 
1{|w  hfpn  us}Qi{.  And  the  law  merchant  has  defined,  with  some 
degree  of  nicet}',  if  not  of  over-nicety,  the  methods  preferred. 

Before  postal  communications  had  become  as  frequent  and  as 
perfect  as  they  now  are,  the  courts  had  declared  that  where  the 
party  to  be  notified  resided  or  did  business  in  the 
same  town  in  which  the  notifying  party  resided  or 
did  business,  the  method  to  be  preferred  was  by  '  personal  '  act, 
which  means  notifying  the  defendant  to  his  face  .or  leaving 
written  notice  for  him  at  his  place  of  business  or  of  residence,^ 
The  mail  was  supposed  to  be  not  so  expeditious;  and  hence 
notice  sent  through  the  post-office,  in  such  a  case,  was  deemed 
insufficient  unless  it  was  in  fact  received,  and  received  no  later 
than  the  latest  day  on  which  it  would  have  been  good  if  orally 
given.'^ 

And  so,  generally  speaking,  the  unwritten  law  stands  at  this 
day.  For  example  :  The  defendant  is  indorser  and  the  plaintiff 
holder  of  a  promissory'  note,  the  note  being  in  the  hands  of  a  bank 
for  collection  at  the  place  of  residence  of  the  defendant.  Upon  the 
note  there  is  a  memorandum,  written  by  the  defendant,  in  these 
words:  'Third  indorser,'  the  defendant,  'lives  at  V,'  the 
place  just  referred  to.  The  collecting  bank,  in  due  time,  by  a 
notary  public,  puts  a  letter  in  the  post-oftice  at  V,  containing 
notice  of  the  dishonor  of  the  paper.  There  is  no  evidence  that 
the  letter  is  received,  nor  is  there  any  evidence  of  usage  at  V 
to  mail  notices  of  dishonor  in  such  cases.  The  defendant  is  not 
liable,  the  memorandum  on  the  note  not  being  an  authorization 
of  notice  by  the  mail.® 

To  that  rule,  which  in  more  recent  times  has  often  been  re- 
gretted, three  exceptions  at  least  have  come  to  be  made  in  the 
unwritten  law,  one  being  perhaps  contemporaneous  with  the  rule 
itself :  to  wit,  (1)  If  the  parties  live  or  do  business  in  a  place  in 
which  letters  are  regularly  and  daily  delivered  by  carriers  of  the 

^  Brown  v.  Bank  of  Abingdon,  85  Va.  95. 

2  Notice  by  telegrapli  would  be  good,  of  course,  if  delivered  in  .seasoa 
Fielding  v.  Corrjs  1898,  1  Q.  B.  268,  271. 
•  Bowling  V.  Harrison,  6  How.  248. 


148  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

government,  or  perhaps  by  private  carriers,  the  notice  may  be 
sent  through  the  mail.  (2)  An  indorser  who,  residing  in  a 
different  town  from  that  of  the  holder,  has  himself  received  due 
notice  through  the  mail,  may  notify  a  prior  indorser  by  the 
mail,  though  that  indorser  resides  in  the  same  town  in  which 
he,  the  notifying  indorser,  resides,  and  though  the  practice  of 
delivering  letters  does  not  prevail  there.  (3)  Where  the  parties 
live  in  different  villages  or  perhaps  districts  of  one  town,  the 
mail  may  be  used  for  sending  notice. 

For  example  (hypothetical)  :  The  defendant  is  indorser  and 
the  plaintiff  holder  of  a  dishonored  promissory  note,  both 
parties  living  in  Chicago.  Notice  of  the  dishonor  may  be  given 
by  mail.  Again :  The  defendant  is  indorser  of  a  bill  of  ex- 
change payable  in  Philadelphia  to  A  or  order,  who  lives  in 
Providence;  A  indorses  the  bill  to  a  bank  in  Providence;  that 
bank  indorses  it  over  to  another  bank  in  New  York,  which  latter 
bank  indorses  it  for  collection  to  a  bank  in  Philadelphia.  The 
bill  is  dishonored,  and  the  collecting  bank  causes  notices  to  be 
made  out  for  all  the  parties,  and  sends  them  seasonably  to  the 
bank  in  New  York;  that  bank  sends  notice  seasonabl}-^  to  the 
bank  in  Providence,  inclosing  a  notice  for  the  defendant;  and 
the  bank  in  Providence  now  places  this  last-named  notice  in 
the  post-office  properly  addressed.  The  defendant's  liability 
under  the  circumstances  is  duly  tixed.^  Again :  The  defendant 
is  indorser  and  the  plaintiff  holder  of  a  promissory  note  which 
has  been  dishonored.  The  parties  both  reside  in  the  town  of 
8,  but  the  defendant  resides  in  another  part  of  the  town  from 
the  plaintiff,  in  a  distinct  village,  C,  where  he  usually  receives 
his  mail.  The  plaintiff  mails  notice  of  dishonor  to  the  de- 
fendant seasonably,  addressed  to  him  at  C.  The  defendant's 
liability  is  duly  fixed. ^ 

When,  indeed,  notice  through  the  mail  is  proper,  the  mere 
mailing  the  notice,  in  a  post-office  or  in  a  letter  box  under  con- 
trol of  the  post-office,^  if  seasonable,  is  enough  to  fix  the  lia- 

^  Eagle  Bank  v.  Hathaway,  5  Jlet.  212. 

3  Shaylor  v.  Mix,  4  Allen,  351.  The  defendant,  however,  received  ths 
notice. 

»  N.  I.  L.  §  113. 


Sect.  5.] 


INDORSER'S   CONTRACT. 


149 


bilit}'  of  the  indorser;  the  law  merchant  does  not  expect  the 
liolder  to  see  that  the  post-master  delivers  it  or  that  Mailing  notice 
the  indorser  has  received  it  in  any  other  way.  For  enough, 
example  :  The  defendant  is  indorser  and  the  plaintiff  holder  of 
a  promissory  note,  the  former  living  in  Boston,  the  latter  in 
Philadelphia.  The  note  is  payable  in  Philadelphia,  is  dishon- 
ored, and  protested  by  a  notary.  The  notary  thereupon  mails 
in  Philadelphia  a  letter  containing  the  notice  to  the  defendant 
in  Boston.  It  does  not  appear  that  the  defendant  has  ever  re- 
ceived the  letter.     The  defendant's  liability  is  duly  fixed.^ 

The  Statute  appears  to  treat  notice  by  the  mail  as  proper  in 
all  cases,  as  it  should  be  in  the  certainty  and  despatch  of  the 
post-office  in  our  day.^ 

Indeed,  judicial  authority,  proceeding  more  or  less  uponA 
custom  in  cities,  has  gone  still  further  and  treated  notice  by 
mail,  when  proper  at  all,  as  good  against  all  jjarties  to  whom 
notices  may  be  inclosed  in  a  single  letter  addressed  to  a  later 
indorser.  So  to  do  has  been  deemed  exercising  due  diligence, 
and  hence  whether  the  letter  or  the  notices  are  ever  received  is 
immaterial.  For  examjile  :  The  defendant  is  third  indorser  and 
the  plaintiffs  are  holders  of  a  promissory  note.  Before  maturity 
of  the  note  the  plaintiffs  send  it  for  collection  to  their  agent, 
a  bank  in  Boston,  which  bank  indorses  it  and  sends  it  to  its 
own  agent,  a  bank  in  New  York.  At  maturity  payment  is 
demanded  and  refused,  and  the  note  duly  protested.  Notices  of 
dishonor  are  thereupon  addressed  by  the  notary  to  each  of  the 
indorsers  and  sent  in  a  letter  to  the  bank  in  Boston,  duly 
addressed  and  mailed  in  the  post-office  in  New  York.  This 
letter,  with  inclosures,  is  lost  and  never  received  by  the  bank  or 
by  the  defendant.  The  liability  of  the  defendant  is  deemed  to 
have  been  duly  fixed,  due  diligence  having  been  exercised  ac- 
cording to  the  usage  and  practice  of  merchants  and  bankers, 
and  it  being  immaterial  that  the  last  indorser  held  the  note  for 
collection  only.' 

1  Munn  V.  Baldwin,  6  Mass.  316.     See  also  Shelton  v.  Carpenter,  60  Ala. 
201 ;  Jones  v.  Wardell,  6  Watts  &  S.  399. 

2  SeeK  I.  L.  §§  110,  111. 
8  Wamesit   Bank   v.   Buttrick,    11    Gray,  387.     But  see   Van   Brunt   »• 


150  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

An  agent,  in  giving  notice,  is  treated  as  if  he  were  principal ; 
hence  whether  notice  to  be  g'iven  by  snnh  person  should  be  by 
Agent  treated  '  personal  '  act  or  by  mail  is  to  be  determined  by 
as  holder.  j^  situation  towards  the  indorser^  not  bv  the  sit- 

uation  of  the  principal  toward.s  the  indnr.^pr.^^ 

A  private  messenger  may  be  emplo^-ed  in  any  case  to  carry 
the  notice,  even  in  those  cases  in  which  the  mail  is  the  preferred 
Use  of  mes-  means.  But  where  the  employment  of  a  messenger 
senger.  ig  i^q^  presumptively  the  method  to  be  adoj>ted  (as 

it  would  be  in  a  village  in  which  both  parties  resided,  there 
being  no  delivery  there  by  carriers,  and  as  it  would  not  be  where 
they  reside  in  different  towns),  the  notice  by  messenger  will  be 
good  only  in  case  it  is  delivered  to  the  indorser  personally,  or  at 
his  place  of  business  or  of  residence,  not  later  than  the  latest 
day  on  which  it  would  reach  its  destination  in  due  course  of  the 
mail. 

Notice  maj^  be  sent  to  the  several  indorsers  in  succession. 
For  example :  A  promissory  note  is  indorsed  by  five  persons 
Notice  in  successively.     The    holder    may   notify    the     fifth 

succession.  indorser;  the  fiftli  indorser  may  then  notify  the 
fourth;  the  fourth  may  then  notify  the  third;  and  so  on  back 
to  the  first.  Each  notice  so  given,  if  seasonable,  will  fix 
liability.^ 

Notice  by  what  is  aptly  termed  inurement  has  already  been 
referred  to  in  the  section  relating  to  the  persons  who  may  give 
Notice  bv  '^^  send  notice.^     The  subject  belongs  equally  to  the 

inurement.  present  section,  and  it  may  accordingly^  be  stated 
here  that  one  of  the  methods  of  notice  is  by  inurement;  and 
that  may  be  explained  by  the  following  example:  The  defend- 
ant is  first  of  three  indorsers  of  a  promissory  note  of  which  the 

Vaughn,  47  Iowa,  145,  where  the  notice  is  treated  as  goo^  provided  the  party 
to  whom  the  notices  are  directed  himself  sends  them  on. 

1  Manchester  Bank  v.  Fellows,  28  N.  H.  302  ;  Bowling  v.  Harrison, 
6  How.  248. 

2  Shelburne  Falls  Bank  v.  Townsley,  107  Mass.  444;  s.  C.  102  Mass.  177. 
When  each  notice  is  seasonable,  see  infra,  §  6. 

»  Ante,  p.  143. 


Sect.  6.]  INDOKSER'S   CONTRACT.  15i 

plaintiff  is  holder.  The  note  being  dishonored  at  maturity,  the 
holder  gives  due  notice  to  the  third  indorser,  and  the  third  iu- 
<lor!ser  gives  due  notice  to  defendant  (or  to  the  second  indorser, 
who  duly  notifies  the  defendant).  The  plaintiff  is  entitled  to 
recover,  the  intermediate  notice  (or  notices)  given  inuring  to  his 
benefit.  1  ^^^,_^      ^^..cw-,^     (X^^^Sjf      %^^^ 

§  6.     Notice,  When. 

Notice  of  dishonor  may  be  given  by  the  holder  either  on  the 

day  of  the  dishonor,  being  the  day  of  maturity,^  or  on  the  first 

following  secular  day;  and    it   must   be   given  on  _, 

°  •'  '  _  ^  _      Presumptive 

one  of  those  two  days  unless  a  sufficient  reason  is  time:  reason- 
shown  for  omitting  to  do  so,^  or  the  indorser  will 
be  discharged.  There  is,  however,  no  case  in  which,  by  the 
law  merchant,  notice  must  be  given  on  the  day  of  dishonor, 
however  easily  it  might  be  done,  and  whatever  the  conse- 
quences of  not  doing  it.  For  example :  The  defendant  is 
indorser  and  the  plaintiff  holder  of  a  promissory  note  payable 
in  Alexandria,  Virginia,  which  matures  August  25.  On  that 
day  it  is  dishonored.  On  the  next  day  notice  is  sent  to  the 
defendant  by  mail  in  Washington,  where  he  resides.  The 
notice  is  seasonable;  the  law  merchant  requiring,  not  the 
utmost,   but  only  ordinary,  reasonable  diligence.* 

It  should  be  remarked  that,  although  what  the  law  merchant 
requires  in  the  matter  of  fixing  the  liability  of  the  indorser, 
whether  in  respect  of  presentment,  protest,  or  notice,  is  only  in 
terms  'reasonable  diligence ' ;  still  what  constitutes  reasonable 
diligence  is  often  defined,  presumptively  but  only  presumptively, 
within  narrow  limits.  And  the  point  under  consideration  is  an 
example.     Reasonable  diligence  only  is  required;*  but  that  is 

1  See  Simpson  v.  Turney,  5  Humph.  419,  where,  however,  the  intermediate 
notice  was  too  late. 

2  jST.  I.  L.  §  109  ;  King  v.  Crowell,  61  Maine,  244  ;  Howard  v.  Ives, 
1  Hill,  263. 

8  Lindo  V.  Fnsworth,  2  Camp.  602  ;  12  Rev.  Rep.  750,  Jewish  festival 
held  by  Lord  EUenboroiigh  ground  for  delay. 

*  Bank  of  Alexandria  v.  Swann,  9  Peters,  33.  See  Smith  v.  Poillon,  87 
N.  Y.  590,  597. 

6  Farnsworth  v.  Mullen,  164  Mass.  112. 


152  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  X. 

interpreted  by  the  law  to  mean,  that  presumptively  notice 
should  be  given  on  one  of  the  two  days  mentioned  in  the  rule. 
If  the  day  following  maturity  and  dishonor  should  be  a  non- 
secular  day,  or  if,  where  the  mail  may  be  used  there  is  no  de- 
Non-secular  parture  of  the  mail  on  the  next  day  after  maturity, 
<lays-  the  holder,  supposing  that  he  resides  in  a  different 

totcn  from  that  of  the  party  to  be  notified,  may  wait  in  the  one 
case  until  the  first  secular  day,  in  the  other,  until  the  next 
departure  of  the  mail  after  the  day  of  maturity,  however  long 
that  may  be.^  It  matters  not  that  there  was  a  regular  departure 
of  the  mail  on  the  day  of  maturity  and  dishonor.  It  will  be 
observed  that,  while  the  occurrence  of  non-secular  days  cuts  off 
grace,  such  occurrence  adds  to  the  time  for  giving  notice. 

If  the  person  giving  and  the  person  to  receive  notice  reside 
in  the  same  town,  notice  of  dishonor  must,  if  given  at  the  place 
of  business  of  the  party  to  be  notified,  be  given  before  the  close 
of  business  hours  on  the  day  following  dishonor  or  of  receiving 
notice.  If  it  is  given  at  the  party's  residence,  it  must  be  given 
b6fore  the  usual  hours  of  rest  on  such  following  day.  If  sent 
by  mail,  it  must  be  deposited  in  the  post-office  soon  enough  to 
reach  the  party  in  usual  course  on  such  following  day.^ 

The  length  of  time  allowed  to  the  holder  for  giving  notice  is 
not  varied  at  all  by  the  circumstance  that  there  may  be  several 
Several  indorsements    upon    the    paper,    and    tliat  he  may 

indorsements,  ^igh  to  notify  some  other  indorser  than  the  last 
one.  The  holder  may  himself  notify  any  indorser  he  will, 
notifying  or  not  notifying  others;  but  he  has  no  more  time  for 
giving  notice  to  the  first  or  an  intermediate  indorser  than  to  the 

1  N.  L  L.  §  111  :  'Where  the  person  giving  and  the  person  to  receive 
notice  reside  in  different  places,  the  notice  ...  if  sent  by  mail  .  .  .  must  be 
deposited  in  the  post-office  in  time  to  go  by  mail  the  day  following  the  day  of 
dishonor,  or  if  there  be  no  mail  at  a  convenient  hour  on  that  day,  by  the  next  <i 
mail  thereafter.  If  given  otherwise  than  through  the  post-office,  then  within 
the  time  that  notice  would  have  been  received  in  due  course  of  mail  if  it 
had  been  deposited  in  the  post-office  within  the  time  specified  in  the  last* 
sentence. 

'  N- 1-  L.  §  110,  3.  This  of  course  supposes  that  there  is  a  mail  delivery  in. 
the  place. 


^^^^^^fc**/*  '7e'^^«4.r-v^     *^^£t-*^^37 

SBcr.  6.]  INDORSER'S  CONTRACT.  153 

last,*  It  does  not  matter  that  as  much  or  more  time  would  be 
taken  if  notices  were  sent  successively  back  from  the  last  to  the 
defendant  indorser.  For  exam[)le  (hypothetical)  :  The  defend- 
ant is  first  indorser  and  the  plaintiff  holder  of  a  promissory  note 
upon  which  there  are  five  successive  indorsements.  Two  days 
after  the  maturity  and  dishonor  of  the  note,  the  plaintiff  notifies 
the  defendant,  though  the  day  after  maturity  was  a  secular  day, 
with  departure  of  mail  during  business  hours.  The  notice  h 
not  seasonable.^ 

There  is,  however,  some  douht  concerning  the  meaning  of  the 

rule  that  the  holder  has  until  the  day  after  maturity,  or  other 

day  according  to  circumstances.     The  rule  clearly   „      ,     , 

,  One  day  for 

does  not  mean  that  notice  must  be  posted,  where  giving  riotice : 
the  mail  may  be  used,  on  that  day  at  all  events. 
Not  to  speak  of  excuses,  of  which  later,  the  onlj'^  mail  on  the  day 
in  question  may  depart  at  an  unseasonable  hour  in  the  morning 
for  business ;  in  such  a  case  the  law  treats  that  day  as  if  it  were 
a  non-secular  day,  so  far  as  the  sending  of  notice  is  concerned.* 
But  supposing  that  there  is  a  departure  of  the  mail  after  business 
hours  have  opened,  on  the  day  after  dishonor,  must  the  holder 
deposit  his  notice  in  the  post-office  in  time  for  that  mail '? 

It  has  been  said  that  the  holder  has  an  entire  day  after  the 
dishonor  for  giving  notice  ;  and  that  has  sometimes  been  inter- 
preted to  mean  that  the  holder  has  until  the  end  of  that  day,  so 
that  the  notice  need  not  leave  until  the  departure  of  the  mail  a 
day  later.  For  example  ;  A  promissory  note  is  due  January  2. 
Demand  is  made,  and  payment  refused  on  that  day.  Notice  of 
dishonor  is  deposited  in  the  post-office  for  the  defendant  at  10 
o'clock  at  night,  January  3  ;  there  have  been  departures  of  the 
mail  since  business  hours  of  the  morning  to  the  place  of  the  de- 

1  See  N.  I.  L.  §§  110,  111 :  'Where  the  person  giving  and  the  person  to 
receive  notice,'  etc.  ;  that  is,  whoever  the  person  to  be  notiiied  is. 

2  See  Simpson  v.  Turney,  5  Humph.  419. 

8  See  Lawson  v.  Farmers'  Bank,  1  Ohio  St.  206;  Cases,  179 ;  3  Kent,  106, 
note.  '  Notice  put  into  the  post-office  on  the  next  day  at  any  time  of  the  day, 
so  as  to  be  ready  to  go  by  the  first  mail  that  goes  thereafter,  is  due  notice, 
though  it  may  not  be  mailed  in  season  to  go  by  the  mail  of  the  day  next  after 
the  day  of  the  default.' 


■^ 


154  BILLS,  NOTES,  AND   CHEQUES.  TChap.  X. 

fendant's  residence,  but  the  last  mail  has  already  departed,  and 
the  notice  cannot  go  before  January  4.  The  mailing  of  the  notice 
is  deemed  seasonable.^ 

•  That  doctrine,  though  having  the  support  of  a  great  judge,  has 
been  seriously  questioned,  an(^dndeed  denied  by  judicial  author- 
ity to  be  a  correct  statement  onthe  law  merchant ;  the  rule,  so 
far  as  there  is  a  rule  so  expressecL  that  the  holder  has  an  '  entire 
day  '  for  giving  notice,  being  co^sictered  only  a  general,  and  not 
an  exact  statement  of  the  law.  ^^e  true  rule  is  accordingly 
deemed  to  be  that  the  holder  ought  to  avail  himself  at  latest  of 
some  departure  of  the  mail  after  the  opening  of  business  hours, 
if  there  be  such  mail,  on  the  day  following  the  dishonor.**  For 
example  :  The  defendant,  residing  in  Salem,  Ohio,  is  indorser 
of  a  bill  of  exchange  held  by  the  plaintiffs,  residing  in  Pitts- 
burgh, Pennsylvania.  The  bill  is  dishonored  and  protested 
July  27.  There  is  one,  and  only  one,  daily  departure  of  the 
mail  from  Pittsburgh  to  Salem :  to  wit,  at  9.10  o'clock  A.  m., 
which  is  after  reasonable  business  hours  of  the  day.  Notice  to 
the  defendant  is  deposited  in  the  mail  on  July  28,  but  too  late 
for  the  mail  of  that  day.  The  notice  is  deemed  not  seasonable ; 
due  diligence  has  not  been  exercised.^ 

The  rule  declared  in  the  case  given  in  this  example  has  this  in 
its  favor,  that  it  was  laid  down  upon  mature  consideration  and 
upon  a  review  of  the  authorities.  A  question  which  before  had 
been  but  slightly  considered  has  now  been  answered  by  deliberate 
judicial  authority  ;  and  the  rule  is  accordingly  to  be  taken,  it 
seems,  in  view  of  the  absence  of  settled  custom  and  the  conse- 
quent doubt,  as  the  better  declaration  of  the  law  merchant. 

Reasonable  diligence,  narrowly  defined  in  certain  cases,  but 
not  in  others,  is  after  all,  as  we  have  seen,  the  requirement  in 
Reasonable  3,11  cases.*  Accordingly  the  point  of  beginning,  in 
diligence.  reckoning  the  time^r  ffi-v^^g*  notice,  is  not  the  day 

after  maturity,  but  the  day  after^^Tonwhich  the  holder,  upon 

^  Lawson  v.  Farmers'  Bank,  referring  to  Kent,  ut  supra. 
2  Peabody  Co.  v.  Wilson,  29  W.  Va.  528. 
8  Lawson  v.  Farmei's'  Bank,  supra. 

*  Bank  of  Utica  v.  Bender,  21  Wend.  643 ;  Cases,  191  ;  Gladvvell  v.  Turner, 
L.  R.  5  Ex.  59. 


Sect.  6.]  INDORSER'S  CONTRACT.  155 

exercising  reasonable  diligence,  is  in  a  position  to  give  notice.* 
For  example  :  The  defendant  is  drawer  and  the  plaintiff  holder 
of  a  bill  of  exchange  dishonored  at  maturity.  On  the  morning 
after  the  dishonor  of  the  bill,  the  holder,  not  knowing  where  the 
defendant  lives,  applies  to  one  of  the  indorsers  at  his  house  for 
information,  but  not  finding  him  at  home,  calls  again  at  5.30  in 
the  afternoon,  and  now  obtaining  from  him  the  defendant's  ad- 
dress, posts  notice  the  same  evening  after  six  o'clock.  The  de- 
fendant's liability  is  fixed,  though  he  does  not  receive  the  notice 
on  the  day  on  which  it  was  posted  as  he  would  have  done  had  the 
notice  been  posted  before  six  o'clock.*^ 

It  would  have  made  no  difference  in  the. example  had  it  ap- 
peared that  the  whole  of  the  day  and  evening  had  been  consumed, 
and  all  of  the  next  day  or  week,  in  reasonable  endeavor  to  find 
the  address  of  the  defendant ;  time  reasonablj^  consumed  in  find- 
ing the  defendant  or  his  address  is  to  be  deducted  from  the  ac- 
count.^ Nor,  as  has  already  been  seen,  would  it  have  made  any 
difference  had  the  notice  never  been  received,  the  mail  being  a 
proper  vehicle  for  conveying  it. 

Thus  far  of  the  time  of  notice  when  given  by  the  holder. 
The  time  allowed  an  indorser  is,  generally  speaking,  the  same 
as  would  be  allowed  if  he  were  holder.'*  He  may  Time  allowed 
give  notice  on  the  day  on  which  he  received  notice;  mdorser. 
he  must  give  notice  either  on  that  day,  or  on  the  first  succeeding 
secular  day  on  which  there  is  a  departure  of  the  mail  to  the  in- 
dorser's  place  of  residence  where  the  mail  may  be  used,  unless 
on  the  first  succeeding  secular  day  the  only  mail  goes  out  before 
seasonable  business  hours  in  the  morning,  in  which  case  the 
indorser,  like  the  holder,  has  till  the  next  mail.  And,  like  the 
holder,  he  has  no  more  time  for  giving  notice  to  a  remote  than 
to  the  last  indorser. 

There  is  one  case  in  which,  it  seems,  an  indorser  may  have 

^  Gladwell  v.  Turner,  supra.  "^  Id. 

3  Fugitt  V.  Nixon,  44  Mo.  295  ;  Manchester  Banki'.  Fellows,  28  N.  H.  302. 

*  N.  I.  L.  §  114  :  '  Where  a  person  receives  notice  of  dishonor,  he  has, 
after  the  receipt  of  such  notice,  the  same  time  for  giving  notice  to  antecedent 
parties  that  the  holder  has  after  the  dishonor. 


156  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  X. 

more  time  for  giving  notice  than  a  holder.  Notice  of  dishonor 
might  be  received  hy  an  indorser  on  Sunday  or  some  other  tion- 
eecular  day;  but  in  such  a  case  the  indorser  would  not  be  bound 
to  regard  it  until  the  first  secular  day  following,  so  that  the 
receiving  of  the  notice  could  be  reckoned,  at  the  indorser's  elec- 
tion, as  from  such  secular  day.  Accordingly,  the  indorser  would 
have  that  day  and  the  next,  even  to  the  next  secular  day,  if  the 
morrow  after  the  day  from  which  the  reckoning  is  begun  should 
be  non-secular,  and  until  a  departure  of  the  mail,  as  already  ex- 
plained. For  example  (hypothetical) :  The  defendant  is  first, 
and  the  plaintiff  second,  indorser  of  a  promissory  note.  Due 
notice  of  dishonor  has  been  sent  to  the  plaintiff.  The  notice  is 
received  on  Sunday,  July  3.  The  following  day  being  a  holi- 
day, the  plaintiff  treats  the  5th  of  July  as  if  it  were  the  day  on 
which  he  received  the  notice,  and  mails  notice  to  the  defendant 
on  the  6th  of  July  (or  if  there  is  no  departure  of  the  mail  to 
the  destination  of  the  notice  on  the  6th,  or  if  the  only  departure 
is  before  reasonable  business  of  that  day,  then  so  as  to  go  by  the 
first  mail  afterwards).     The  notice  is  (probably)  seasonable.'^ 


Notice  sent  on 


Notice  may,  however,  be  sent,  whether  by  the 
non-secular        holder  or  by  an  indorser,  on  Sunday  or  other  tion- 
*-^'  secular  day,  since  notice  is  merely  warning.^ 

An  agent  for  collection  is  treated  as  holder  for  the  purpose  of 
giving  notice  of  dishonor,  and  his  principal,  if  he  indorsed  the 
Agent  treated  paper,  IS  accordingly  treated  as  an  ordinary  in- 
as  holder.  dorser ;  that  Is,  the  case  is  regarded  as  if  it  were 

not  a  case  of  agency.  In  other  words,  the  real  holder  and  owner, 
if  an  indorser,  stands  upon  the  footing  of  an  indorser  in  regard 
to  the  question  of  time  in  giving  notice  of  dishonor.  Thus  the 
agent  has  the  same  time  for  notifying  his  principal  which  any 
other  holder  would  have  ;  and  the  principal  has  the  same  time 
he  would  have  if  the  agent  had  been  owner  of  the  paper. ^ 

1  See  Wright  v.   Shawcross,  2  Barn.  &  Aid.  501,  note  ;  Bray  v.  Hadwcn, 
5  Maule  &  S.  68  ;  Deblieux  v.  Bullard,  1  Rob.  ( La. )  66. 

2  Deblieux  v.  Bullard,  supra. 

'  N.  I.  L.  §  101  ;  Lawson  v.  Farmers'  Bank,  1  Ohio  St.  206  ;  Cases,  179 ; 
Bank  of  United  States  v.  Davis,  2  Hill,  452  ;  Church  v.  Barlow,  9  Pick.  547 ; 


Sect.  7.]  INDORSE  R'S  CONTRACT.  157 

An  instrument  may  have  been  indorsed  after  maturitj^^^and  -^^^.c^vk^A 
serious  question  has  arisen  concerning  time  of  notice  in  such  att  0^*c^-1 
case.  It  has  sometimes  been  considered  that  the  paper  imlorsed'*"^^  **^ 
rules  pertaining  to  indorsement  of  i)aper  before  *^^*""  "^^^^^^^y- ^-fuJ^Jt^ 
maturity  should  not  apply,  in  their  strictness,  if  at  all,  to  such  a 
case;  and  accordingly  notice  of  dishonor  as  late  as  two  months 
after  the  dishonor,  on  the  special  demand  now  required,^  has 
been  deemed  within  reasonable  time.^  It  has  even  been  stated 
that  notice  is  altogether  dispensed  with  in  such  a  case.^  But 
the  better  view  appears  to  be  that  the  rules  of  ordinary  indorse- 
ment apply.  Indorsers  of  paper  payable  on  its  face  on  demand 
are  entitled  to  notice  in  all  respects  as  in  other  cases ;  and  why 
the  rule  should  be  otherwise  of  paper  indorsed  after  maturity, 
which  now  is  in  law  payable  on  demand,  it  would  be  difficult  to 
explain.* 

§  7.     Notice,  Where. 

The  question  where  notice  is  to  be  given  or  sent  has  been 
indirectly  answered  already,  in  part.  We  have  seen  that  where 
the  holder  and  the  indorser  reside  in  the  same  town  Residence  of 
the  notice  should  be  given  to  the  indorser  personally  P»''t'es- 
or  left  at  his  place  of  business  or  of  residence,  and  that  when 
they  live  in  different  places  it  should  be  sent  to  the  indorser's 
address  as  far  as  ascertainable  by  reasonable  diligence;  unless 
the  party  to  be  notified  has  added  an  address  to  his  signature,  in 

Crocker  v.  Getchell,  23  Maine,  392 ;  Manchester  Bank  v.  Fellows,  28  N.  H. 
302 ;  Bray  v.  Hadwen,  5  Maule  &  S.  68 ;  Prideaux  v.  Criddle,  L.  R.  4  Q.  B. 
455. 

^  The  paper  having  been  indorsed  after  maturity,  a  new  contract  in  regard 
to  presentment  arises,  to  wit,  that  the  undertaking  of  the  maker  or  acceptor 
is  to  pay  on  demand.     See  ante,  p.  115. 

'  "Van  Hoesen  v.  Van  Alstyne,  3  Wend.  75.  See  also  McKinney  v.  Craw- 
ford, 8  Serg.  &  R.  351  ;  Gray  v.  Bell,  3  Rich.  71 ;  Chadwick  v.  Jeffers, 
1  Rich.  397. 

3  Gray  v.  Bell,  supra,  O'Neall,  J. 

*  See  Landon  v.  Bryant,  69  Vt.  203  ;  Bassenhorst  v.  Wilby,  45  Ohio  St, 
333  ;  Rockwood  v.  Crawford,  18  Conn.  361  ;  Bishop  v.  Dexter,  2  Conn.  419  ; 
Berry  v.  Robinson,  9  Johns.  121  ;  Course  v.  Shackleford,  2  Nott  &  M.  283  ? 
Poole  V.  Tolleson,  1  McCord,  199;  Ecfert  v.  Des  Coudres,  1  Mill,  69. 


158  BILLS,  NOTES,  AND  CHEQUES.  [Chap  X 

which  case  notice  must  be  sent  accordingly.^  That  goes  far 
towards  answering  the  whole  question  now  raised.  The  notice 
should  be  sent  where  it  will  be  most  likely  to  be  received."^ 

Notice  may,  however,  be  given  to  the  indorser  personally  any- 
where, wherever  the  holder  or  notifying  indorser  may  happen  to 
Personal  ^^^  him,  SO  far  as  place  is  concerned  ;  it  may  be 

notice.  given  to  him  in  his  house  or  counting  room,  in  the 

cars,  or  on  the  street,  so  long  as  it  is  good  in  other  respects.' 
And  that  because  the  notice  is  mere  warning,  and  not  intended 
or  expected  to  be  followed  then  and  there  by  payment,  as  is  pre- 
sentment for  payment. 

It  may  be  that  the  indorser  has  post-ofl&ce  addresses  in  differ- 
ent towns,  or  it  may  be  that  there  are  several  post-offices  within 
Different  ^he  same  town  at  each  of  which  the  indorser  is 

addresses.  accustomed  to  receive  his  mail.  In  such  a  case,  if 
the  party  has  not  given  his  address  to  the  notifying  party,  a 
letter  containing  the  notice  may  be  addressed  to  the  indorser 
at  the  post-office  nearest  his  residence,  or  at  the  post-office  at 
which  he  usually  receives  his  mail,*  or,  it  seems,  where  the  facts 
are  not  known  to  the  notifying  party,  to  the  town  without 
naming  any  particular  post-office  ;  and  the  proper  deposit  of  the 
letter  in  the  mail,  whether  at  the  post-office  or  in  boxes  placed 
for  receiving  mail,  will  itself  be  notice.  Such  act  would  be 
exercising  reasonable  diligence,  and  what  may  become  of  the 
letter  will  be  immaterial.^ 

Where  there  are  several  post-offices  in  the  town  of  the  in- 
dorser, notice  by  letter  addressed  to  the  indorser  at  the  town  gen- 
erally appears,  as  has  just  been  said,  to  be  sufficient,  unless  the 
indorser  has  been  accustomed  to  receive  his  letters  at  one  of  the 

1  N.  I.  L.  §  115. 

2  American  Bank  v.  Junk,  94  Tenn.  624  ;  Bank  of  America  v.  Shaw, 
142  Mass.  290  ;  Casco  Bank  v.  Shaw,  79  Maine,  376. 

3  N.  L  L.  §  115 :  '  Where  notice  is  actually  received  by  the  party  within 
the  time  .specified  in  this  Act,  it  will  be  sufficient  though  not  sent  in 
accordance  with  the  requirements  of  this  section.'  See  Hy.slop  v.  Jones, 
3   McLean,    96. 

*  N.  L  L.  §  115,  1. 

*  See  Roberts  v.  Taft,  120  Mass.  169. 


Sect.  7.]  INDORSER'S  CONTRACT.  159 

offices  in  particular,  and  to  have  his  letters  addressed  to  him  there. 
In  other  words,  the  holder  makes  out  a  presumptive  case,  so  far, 
by  proving  that  notice  was  sent  to  the  indorser  in  a  letter  by 
mail  addressed  to  the  town  generally.  But  that  presumptive 
case  may  be  met  by  the  indorser  by  showing  that  there  were 
several  post-oflfices  in  the  town  to  the  knowledge  of  the  notifying 
party,  that  the  indorser  usually  received  his  letters  at  one  ofifice 
only,  and  that  the  fact  might  have  been  leai-ned  by  reasonable 
inquiry.  Without  such  evidence  it  might  still  be  true  that  the 
indorser  received  his  mail  at  any  of  the  post-offices.^  If,  how- 
ever, the  letter  was  in  fact  received  in  due  time,  it  would 
make  no  difference  that  there  may  have  been  a  mistake  in  the 
address.^ 

The  post-office  address  of  the  defendant  is  still  a  matter  of 
first  importance ;  that  rather  than  the  precise  locality  of  his 
residence.  And  hence  where  the  indorser's  address  is  known  to 
the  notifying  partj',  and  the  latter  sends  notice  addressed  to  his 
place  of  residence,  that  being  in  another  town,  he  must  see  to  it, 
it  seems,  that  the  indorser  receives  the  notice  and  receives  it  in 
due  time.  Clearly  where  an  indorser  receives  his  mail  usually 
in  the  town  of  his  residence,  but  sometimes  in  another  town, 
notice  should  be  sent  to  the  post-office  of  his  town.  For  ex- 
ample :  The  defendant  is  indorser  and  the  plaintiff  holder  of  a 
dishonored  promissory  note  ;  the  two  living  in  different  towns. 
The  defendant  sometimes  receives  his  letters  at  the  post-office  of 
the  town  in  which  the  plaintiff  resides,  but  usually  at  the  post- 
office  of  his  own  town.  The  plaintiff  drops  a  letter  in  his  own 
post-office  addressed  to  the  defendant,  which  is  not  received  in 
due  time.     The  defendant  is  discharged.^ 

Perhaps  the  rule  would  be  different  if  the  plaintiff  did  not 
know  that  the  defendant  lived  in  another  town  from  the  one  at 
which  the  plaintiff  knew  that  he  received  letters.  At  all  events 
notice  at  the  plaintiff's  post-office  would  be  good  if  the  plaintiff, 
in  mailing  it  there,  acted  upon  information  properly  sought  and 

1  Roberts  v.  Taft,  supra ;  Morton  v.  Westcott,  8  Cush.  425  ;  Saco  Bank  «>. 
Sanborn,  63  Maine,  340  ;  Downer  v.  Renier,  21  Wend.  10. 

2  Roberts  v.  Taft,  supra. 

3  Shelburne  Falls  Bank  v.  Townsley,  107  Mass.  444. 


160  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

obtained.  If  the  party  to  be  notified  live  in  one  town  and  have 
his  place  of  business  in  another,  notice  may  be  sent  to  either 
place.^ 

It  is  possible  that  the  indorser  may  live  in  a  very  sparsely 
settled  part  of  the  country,  and  that  there  may  be  no  post-office 
in  the  town  in  which  he  lives.  In  such  a  case  the  holder  does 
Jill  that  is  required  by  sending  notice  directed  to  the  indorser  at 
the  nearest  town  having  a  post-office,  so  far  as  can  be  ascertained 
by  reasonable  inquiry."^ 

In  a  case  of  removal  by  the  indorser,  of  which  the  holder  has 
•no  notice  otherwise,  the  indorser  should  inform  him  if  he  wants 
Removal  by  notice  sent  to  his  new  place  of  residence.  In  the 
indorser.  absence  of  notice  of  the  change,  notice  of  the  dis- 

honor may  be  sent  to  the  indorser's  former  place  of  business  or 
residence;'  at  all  events  if  the  notifying  party,  not  satisfied 
with  his  previous  information,  makes  inquiry  where  he  would  be 
likely  to  receive  correct  information,  and  then  acts  accordingly.* 
Whether  one  who  has,  some  considerable  time  before,  had  suffi- 
cient information  of  the  residence  of  the  indorser  may  afterwards 
safely  act  upon  that  information,  and  send  notice  accordinglj-, 
without  inquiry  at  the  time  of  sending,  may  in  some  cases  raise 
a  doubt;  but  it  appears  to  be  the  general  rule  that  when  nothing 
has  occun-ed  to  suggest  to  the  notifying  party  a  change  of  resi- 
dence by  the  indorser,  no  further  inquiry  is  necessar3\^ 

Of  cases  in  which  the  parties  have  lived  near  each  other,  as  for 
instance,  in  some  small  town,  the  holder  knowing  where  the  in- 
dorser has  lived,  it  may  be  presumed  from  their  nearness,  together 
with  any  frequency  of  communication  and  notoriety  of  removal, 
that  the  holder  was  aware  of  the  indorser's  change  of  domicile.^ 

1  N.  L  L.  §  115,  2. 

2  Shed  V.  Brett,  1  Pick.  401,  411 ;  Ireland  v.  Kip,  11  Johns.  232  ;  Union 
Bank  v.  Stoker,  1  La.  An.  269  ;  Marsh  v.  Burr,  Meigs,  68  ;  s.  c.  9  Yerg.  253. 

'  Bank  of  America  v.  Shaw,  142  Mass.  290  ;  Casco  Bank  v.  Shaw,  79  Maine, 
376 ;  American  Bank  v.  Junk,  94  Tenn.  624. 

*  Saco  Bank  v.  Sanborn,  63  Maine,  340. 

*  Id. ;  Bank  of  Utica  v.  Phillips,  3  Wend.  408  ;  Gawtry  v.  Doane,  51  N.  Y. 
84 ;  Berridge  v.  Fitzgerald,  L.  R.  4  Q.  B.  639. 

6  McVeigh   v.  Allen,    29   Gratt.  588,   596;    Bank  of  Old  Dominion   v. 


Sect.  7.]  INDORSER'S   CONTRACT.  161 

Temporary  absence  from  home  does  not,  according  to  the  un- 
written law  merchant,  amount  to  removal,  so  as  to  require  or 
even  permit  sending  notice  to  the  temporary  place  _ 
of  abode ;  though  notice  received  there  in  due  time  absence :  con- 
will  be  good.  For  example :  The  defendant  is  in- 
dorser  and  the  plaintiff  holder  of  a  promissory  note,  both  parties 
residing  in  New  Jersey.  Business,  however,  takes  the  defend- 
ant to  Cleveland,  Ohio,  for  the  season  of  the  year  when  the 
note  matures,  and  keeps  him  there  much  of  the  time.  About 
November  1  he  goes  from  Cleveland  to  Chicago  on  business 
likely  to  take  some  considerable  time,  and  informs  the  plaintiff 
that  he  is  going  there.  He  remains  in  Chicago  until  November 
22,  on  which  day  notice  of  dishonor  is  mailed  to  him  at  that 
place.  The  notice  is  not  received,  the  defendant  having  left  for 
Cleveland  before  the  notice  arrived.  On  his  return  to  Cleveland, 
he  is  informed  by  the  plaintiff  of  what  has  happened.  The  de- 
fendant is  discharged;  a  temporary  place  of  abode  presumptively 
not  being  a  place  to  which  notice  of  dishonor  should  be  sent.^ 

It  seems,  however,  that,  where  an  indorser  has  a  regular  abode 
for  a  considerable  time  in  the  year,  a  notifying  party,  having 
knowledge  of  such  place  of  abode,  and  no  knowledge  of  his 
proper  domicile  or  permanent  home,  may  send  notice  to  such 
abode,  or  give  notice  there.  For  example:  The  defendant, 
indorser  of  a  promissory  note  held  by  the  plaintiff,  is  a  senator 
of  the  United  States,  having  an  abode  in  Washington  during 
the  session  of  Congress.  He  leaves  an  agent  in  a  city  near  hia 
legal  domicile  to  attend  to  his  business,  but  of  that  fact  the 
plaintiff  is  not  aware.  Notice  of  dishonor  is  seasonably  mailed 
to  the  defendant  at  Washington.     The  notice  is  deemed  good.' 

McVeigh,  26  Gratt.  785;   s.  c.   29  Gratt.   546;   Harris  v.  Memphis   Bank, 
4  Humph.  519  ;  Bank  of  Utica  v.  Phillips,  3  Wend.  408. 

1  Walker  v.  Stetson,  14  Ohio  St.  89  ;  Cases,  195.  Something  is  said  of 
the  defendant's  having  had  no  '  relations  to  the  post-office '  in  Chicago,  what- 
ever that  may  mean.  The  real  point  is  that  Chicago  was  not  the  defendant's 
place  of  residence  or  his  post-office  address  for  the  purpose  in  question.  Query, 
whether  Cleveland  would  not  have  been  a  proper  place  to  which  to  send,  or  at 
which  to  give  notice  ?  The  notice  actually  given  there  was  too  late,  because 
of  the  delay  in  sending  the  letter  to  Chicago. 

i' Chouteau  w.  Webster,  6  Met.  1.  ,    ,       . 

11 


162  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  X 

Such  notice  would,  more  clearly  still,  be  good  if  the  senator 
had  given  up  his  residence  in  the  State  he  represented,  and  had 
left  no  one  there  to  attend  to  his  business.^  Perhaps  the  case 
of  a  member  of  the  Legislature  at  the  Capitol,  away  from  home, 
would  fall  within  the  principle  governing  the  case  of  the  exam- 
ple; but  cases  of  the  kind  have  been  thought  to  go  to  the  vero-e 
of  the  law  merchant.^  The  Statute  has  put  the  subject  upon  a 
better  footing  by  providing  that  if  the  party  to  be  notified  '  is 
sojourning  in  another  place,  notice  may  be  sent  to  the  place 
where  he  is  sojourning.'® 

In  regard  to  seeking  information,  inquiry  should  be  made  of 
some  one  from  whom,  or  through  some  source  of  information 
Making  in-  where,  trustworthy  information  will  be  apt  to  be 
quiry-  given.     It   is  usual    and  proper  for  the  notifying 

party  to  make  inquiry  of  some  other  party  to  the  paper,  e.  g.,  a 
later  indorser,  in  regard  to  the  place  of  residence  of  indorsers; 
and  such  course  will  be  especially  proper,  if  not  necessary, 
where  the  notifying  party  has  reason  to  think  that  any  party 
to  the  paper  knows  of  such  place  of  residence,  assuming,  of 
eourse,  that  the  party  having  the  knowledge  is  within  reason- 
able reach,*  And  if  a  notary  is  employed,  the  holder  should 
give  him  the  benefit  of  any  information  he  has.^ 

It  is  not  enough,  it  seems,  to  make  inquirj-  for  an  indorser's 
place  of  residence  at  the  post-oifice,  where  the  indorser  resides  in 
a  large  city,  unless  indeed  he  has  lately  been  employed  iu,  or 
connected  with,  the  post-office.  The  proper  way  is  to  consult 
some  good  city  directory,  and  in  case  of  removal,  then  at  the 
indorser's  last  place  of  business  or  of  residence.^  Or,  if  in  a 
case  of  the  kind  the  indorser's  name  does  not  appear  in  the  di- 
rectory, inquir}'  may  be  made  of  some  other  party,  as  the  maker 
or  acceptor;   and  if  information  is  given,   notice  may  be   sent 

1  Tunstall  v.  Walker,  2  Smedes  &  M.  638. 

2  Walker  v.  Stetson,  14  Ohio  St.  89;  Cases,  195. 
s  N.  L  L.  §  115,  3. 

<  Wolf  V.  Burgess,  59  Mo.  583  ;  Gilchrist  v.  Donnell,  53  Mo.  591. 

'  Edwards  v.  Thomas,  66  Mo.  468. 

6  Miller  v.  Farmers'  Bank,  30  Md.  392. 


r  until      ^ / 


Sect.  7.]  INDORSEE'S   CONTRACT.  163 

accordingly,  whether  the  information  given  was  right  or  not.^ 
Of  course,  inquiry  may  be  made  of  relatives  of  the  indorser.' 
If  on  going  to  the  indorser's  house  to  give  him  notice,  the  house 
is  found  closed  and  unoccupied,  inquiry  may  and  perhaps  should 
be  made  at  the  next  door,  if  there  be  a  house  near.^ 

Inquiry  should  be  pursued  for  the  time  until  some  satisfac 
tory,  that  is,  apparently  trustworthy,  answer  is  given,  o 
it  is  reasonabl}'^  clear  that  nothing  useful  can  be  found 
When,  however,  the  apparently  trustworthy  information  is 
received,  inquiry  may  stop,  and  notice  may  be  sent  accord- 
ingly;  and  the  notice  will  be  good  whether  the  information 
was  correct  or  not.*  For  exam[)le :  The  defendant  is  iiulorser 
of  a  bill  of  exchange  held  by  the  plaintiff.  On  discounting  the 
bill,  the  plaintiff  inquires  of  the  drawer  where  the  defendant 
resides,  and  receives  an  answer,  according  to  which  he  sends 
notice  of  dishonor  seasonably  to  the  defendant,  nothing  having 
occurred  to  lead  him  to  doubt  the  correctness  of  the  information. 
The  notice  is  good,  though  the  information  is  incorrect.* 

The  place  of  date  of  a  bill  is  presumptively  the  place  of  resi- 
dence of  the  drawer,  and  so  would  be  the  place  of  date  of  an  in- 
dorsement,  if  added,    in   regard  to   the   indorser's 

. ,  11  .  1  1       •       ,.        1  Place  of  date, 

residence;  and  there  is  good  authority  tor  the  state- 
ment that  the  notifying  party  may  rely  upon  such  date  if  he  has 
no  reason  to  doubt  whether  the  drawer  or  indorser  lives  at  the' 
particular  place.  For  example  :  The  defendant  is  drawer,  and 
the  plaintiff  holder,  of  a  bill  of  exchange  dated  at  A.  Notice  of 
dishonor  is  directed  to  the  defendant,  in  due  time,  at  A,  though 
A  is  not  his  place  of  residence,  and  though  the  plaintiff  might 
have  learned  on  inquiry  where  the  defendant  resides.  The  notice 
is  not  received.     The  defendant's  liability  is  deemed  duly  fixed." 

There  is  also  equally  good  authority  that  the  notice  would 

1  Gawtry  v.  Doane,  51  N.  Y.  84. 

2  Requa  v.  Collins,  51  N.  Y.  144. 

3  Williams  v.  Bank  of  United  States,  2  Peters,  96. 

♦  Saco  Bank  v.  Sanborn,  63  Maine,  340  ;  Bank  of  Utica  v.  Bender,  21 
Wend.  643. 

'  Bank  of  Utica  v.  Bender,  supra. 

«  Burmester  v.  Barron,  17  Q.  B.  828;  Pierce  v.  Struthers,  27  Penn.  St.  249. 


364  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  X. 

not  be  sufficient  in  such  a  case,  in  the  absence  of  evidence  that 
the  plaintiff  had  made  due  inquiry  for  the  defendant's  place 
of  residence.^  But  it  is  to  be  observed  that  the  defendant,  by 
dating  the  bill  or  indorsement  as  he  has  done,  has  himself  mis- 
led the  plaintiff;  can  the  defendant  afterwards  object  to  his 
own  act?  Clearly,  however,  if  the  plaintiff  had  reason  to  know 
that  the  place  of  date  was  not  the  defendant's  place  of  residence, 
he  cannot  safely  treat  the  place  of  date  as  the  proper  address.* 
And  of  course  the  place  of  date  of  a  bill,  note,  or  cheque  has 
nothing  to  do  with  the  place  of  address  of  an  indorser  not  being 
also  drawer  or  maker.' 

§  8.     Diligence. 

The  whole  matter  of  the  several  steps  required  to  fix  the  lia- 
bility of  an  indorser  may  be  summed  up,  as  has  already  been 
stated  or  intimated  more  than  once,  by  the  statement  that  the 
law  merchant  requires  reasonable  diligence,  and  that  only.* 
What  constitutes  reasonable  diligence  is  fixed,  presumptively 
but  not  absolutely,  in  certain  cases,  as  in  the  matter  of  time  of 
presentment  and  time  of  notice  of  dishonor;  in  other  cases  it 
remains  a  question  of  fact  upon  all  the  circumstances  of  the 
case.  However,  when  the  facts  are  all  found  or  admitted,  the 
court  will  ordinarily  determine,  whatever  the  case,  whether 
they  show  a  compliance  with  the  rule  of  reasonable  diligence.® 

1  Lowery  v.  Scott,  24  Wend.  358  ;  Spencer  v.  Bank  of  Salina,  3  Hill,  520  ; 
Carroll  v.  Upton,  3  Comst.  272  ;  Taylor  v.  Snyder,  3  Denio,  145;  Sprague 
V.  Tyson,  44  Ala.  338  ;  Tyson  v.  Oliver,  43  Ala.  458  ;  Barnwell  v.  Mitchell, 
3  Conn.  101. 

2  Pierce  v.  Struthers,  27  Penn.  St.  249.  See  further,  Mason  v.  Pritchard, 
9  Heisk.  793. 

3  Lawrence  v.  Miller,  16  N.  Y.  235,  240;  Spencer  v.  Bank  of  Salina, 
3  Hill,  520. 

*  N.  I.  L.  §  119  :  *  Notice  of  dishonor  is  dispensed  with  when,  after  the 
exercise  of  reasonable  diligence,  it  cannot  be  given  to  or  does  not  reach  the 
parties  .sought  to  be  charged.' 

5  Bank  of  Utica  v.  Bender,  21  Wend.  643  ;  Cases,  191  ;  Carroll  v.  Upton, 
3  Comst.  272  ;  Walker  v.  Stetson,  14  Ohio  St.  89 ;  Cases,  195  ;  Bank  of 
Columbia  v.  Lawrence,  1  Peters,  578  ;  Wheeler  v.  Field,  6  Met.  290 ;  Peters 
V.  Hobbs,  25  Ark.  67  ;  Farmers'  Bank  v.  Gunnell,  26  Gratt.  131  ;  Tardy  v. 
Boyd,  id.  631. 


Sect,  8.]  LNDORSER'S  CONTRACT.  165 

Reasonable  diligence  having  been  exercised,  the  notifying 
party  may,  it  seems,  rest  in  security ;  it  matters  not  now  what 
further  information  may  come  to  hand;  even  if  it  show  that  the 
information  acted  upon  was  false  and  the  true  state  of  things  is 
now  made  known,  it  may  be  disregarded.  So  it  has  been  held 
by  high  authority,^  though  the  contrary  has  been  laid  down,  but 
in  ignorance  apparently  of  the  former  decision.^ 

What  has  been  said  in  the  foregoing  sections  is  said  upon 
the  assumption  that  no  excuse  for  omitting  the  step  or  steps 
has  arisen. 

*  Lambert  v.  Ghiselin,  9  How.  552. 
»  Beale  v.  Parrish,  20  N.  Y.  407. 


V«c  ^a,  ifci  ^-w-<IZJ   ^Pw^-c/v^ltft^Oo,Aev^^ 


166  BILLS,  NOTES.  AND  CHEQUES.  [Chap.  XL 


CHAPTER   XI. 

INDORSEE'S  CONTRACT   CONTINUED:  EXCUSE   OF 

STEPS. 

§  1.     Temporary  Excuse. 

Heretofore  it  has  been  assumed  that  no  question  of  per- 
manent excuse  in  regard  to  the  steps  for  fixing  the  indorser's 

liability  was  involved,  though  mere  delays  and  tlie 
The  rule  stated.  , ,         ^  /  ■, 

reasons  tnereior,  or  temporary  excuses,  have  been 

under  consideration  from  time  to  time.  The  law  in  regard  to 
temporary  excuses  may  be  thus  summed  up :  Whenever  it  has 
become  impracticable,  without  fault  of  the  holder,  to  take  the 
steps  at  the  time  required,  the  holder  is  excused  from  doing  so 
until  a  reasonable  time  after  it  becomes  practicable  to  take  the 
steps.*  Of  course  if  the  indorser  himself  has  caused  the  delay, 
as  by  indorsing  just  before  or  at  maturity,  at  a  place  too  distant 
for  presentment  thereupon,  at  maturity,  the  indorser  will  not 
be  permitted  to  object  to  the  delay. 

Now,  however,  we  encounter  cases  in  which  one  or  more  of 
the  steps  was  omitted  altogether,  and  the  plaintiff's  contention 
is  that  the  taking  of  the  steps  at  any  time  was  unnecessary,  the 
law  merchant  finding  in  the  facts  a  sufficient  excuse  for  the 
omission.  What  facts  then  excuse,  not  some  delay,  but  per- 
manent omission,  the  indorser  being  held,  notwithstanding, 
as  if  all  the  steps  presumptively  required  had  been  taken  ? 
W^aiver  and  facts  not  of  waiver  may  constitute  such  excuse. 

1  N.  L  L.  §§  88,  120.  See  Windham  Bank  v.  Norton,  22  Conn.  213; 
Cases,  132;  Fanners'  Bank  v.  Gunnell,  26  Gratt.  131  ;  Tardy  iJ.  Boyd,  id.  631  ; 
Lane  v.  Bank  of  West  Tennessee,  9  Heisk.  419;  Dunbar  v.  Tyler,  44  Miss.  1  ; 
Durden  v.  Smith,  id.  548  ;  Bank  of  Old  Dominion  i'.  McVeigh,  26  Gratt. 
785,  805,  806. 


Sjsct.  2.]  INDORSEE'S   CONTUACT.  167 

§  2.     Permanent  Excuse  of  both  Presentment  and 

Notice. 

The  most  common  cases  are  waivers.  A  waiver  is  an  aban- 
donment or  surrender  of  a  known  right,  like  gifts,  requiring  no 

consideration,^    and    may    be    express    or    implied.   „,, 

•^  ^  _  ^  \\  liat  IS  meant 

There  is  nothing  to  prevent  the  waiver  by  an  by  waiver:  ex- 
indorser    of    all     the    conditions    upon    which    his  ^ 

undertaking  otherwise  would  depend.  Thus  he  may  write,  in 
connection  with  his  indorsement,  the  words  '  waiving  demand 
and  notice,'  or  he  may  orally*  waive  demand  and  notice, 
or  the  instrument  itself  may  be  executed  with  such  a  waiver 
written  in  the  body  of  it.^  Such  act  will  make  it  unnecessary 
for  the  holder  to  take  any  of  the  steps  ordinarily  required 
for  fixing  liabilit}',  the  word  *  demand  '  being  understood  to 
include  presentment. 

An  unconditional  promise  to  pay,   or  assurance  of  payment.(Jj^/til 
made  by  the  indorser,  would  have   a  like   effect;  it  would  be        U^mXai 
equivalent   to  an  express  waiver  of  the  taking  of  Promise  to  pav, 
any  steps.*     For   example :    The   defendant   is   in-  ^^'^  "'^  ''^*^- 
dorser    and    the    iilaintiff   holder  of   a  promissory   note.      The 
defendant  being   indebted  to  the  plaintiff  has  given  to  him  the 
note,   indorsing  it   as  security  for   the   debt.      The   maker   dies 
before  the  note  matures,  and  afterwards  before  its  maturity  the 
plaintiff  intrusts  it  to  A  for  collection.     A  calls  upon  the  de- 
fendant and  asks  him  if  he  (A)  should  have  the  note  protested 
against  the  maker's  estate.     The  defendant  replies  that  he  need 
not  do  so,  and  says  that  the  note  shall  be  paid  at  maturity.     A 
puts  the  note   away   in   his  portfolio,    where   it    remains   until 
after  maturity,  no  steps  being  taken  for  fixing  the  defendant's 
liability.     The  taking  of  such  steps  is  unnecessary.* 

^  Compare  renunciation  of  rights.  '  The  holder  may  expressly  renouiict; 
his  rights  against  any  party  to  the  instrument  before,  at,  or  after  maturity.' 
N.  I.  L.  §  129.     E.  g.  by  striking  out  an  indorsement. 

2  An  indorser  may  estop  himself  from  setting  up  the  benefit  of  a  statute 
requiring  waivers  to  be  in  writing.    Hallowell  Bank  v.  Marston,  85  Maine,  488. 

2  Phillips  V.  Dippa,  93  Iowa,  35. 

*  Glidden  v.  Chamberlin,  167  Mass.  48fi. 

*  Sigerson  v.  Mathews,  20  How.  496. 


168  BILLS,  NOTES,  AND   CHEQUES.  (Chap.  XI 

Indeed,  when  an  indorser  says  to  the  holder  that  an  arrange- 
ment for  payment  of  the  paper  is  about  to  be  made,  and  either 
in  direct  terms  or  by  reasonable  implication  requests  the  holder 
to  wait  or  to  give  time,  that  amounts  to  an  assurance  that  the 
paper  will  be  paid  either  by  the  promisor  or  by  the  indorser; 
and  hence  it  is  a  waiver  of  presentment  and  notice.  For  it 
tends  to  put  the  holder  off  his  guard  and  to  induce  him  to  forego 
the  ordinary  steps,  so  that  it  would  be  unjust  to  urge  the  omis- 
sion of  those  steps  thereafter.^  But  it  must  be  reasonably  clear 
that  the  indorser's  promise  or  assurance  is  to  pay  ;  words  on 
occasions  of  the  kind  are  not  to  be  taken  very  strongly  against 
the  indorser.  Thus  for  the  indorser  to  say  that  he  would  '  stand 
good '  for  payment  is  not  to  say  that  he  will  pay,  and  is  uo 
waiver  of  steps. ^ 

In  the  case  of  inland  bills,  promissory  notes,  and  cheques,  it 
seems  that  a  *  waiver  of  protest  '  will  have  the  like  effect  ;  • 
^  .        ,         clearly  it  will  where  the  parties  have  already  given 

Waiver  of  pro-  •'  .  ^  .        ,     .  . 

test :  inland       that  interpretation  to  such  words  in  their  previous 

*'  ®  <^-  recent  dealings.     For  example  :   The  defendant  is 

indorser  and   the   plaintiff  holder  of  a  promissory  note.     The 

defendant  sends  to  the  plaintiff  a  writing  in  the  following  words  : 

*  I  do  request  that  hereafter  any  notes  that  may  fall  due  in  the 

Union  Bank  [the  plaintiff],  on  which  I  am  or  may  be  indorser, 

shall   not  be  protested,  as  I  will   consider  myself  bound  in  the 

same  manner  as  if  the  said  notes  had  been  or  sliould  be  legally 

protested.*     The    plaintiff   and    defendant    have  had    a   course 

of  dealings  founded    upon  interpretation    of  the  writing   as    a 

waiver  of  all  steps.     No  steps  to  fix  the  defendant's  liability 

are  necessary.* 

1  Gove  V.  Vining,  7  Met.  212 ;  Bryant  v.  Wilcox,  49  Cal.  47  ;  Moyar'a 
Appeal,  87  Penn.  St.  129. 

2  Freeman  v.  O'Brien,  38  Iowa,  406.  But  this  case  appears  to  have  leaned 
too  far  in  favor  of  the  indorser,  in  view  of  other  facts  which  appear  in  it.  An 
indorsement  with  the  words  '  eventually  accountable '  would  waive  present- 
ment and  notice.  McDonald  v.  Bailey,  14  Maine,  101.  So  would  writing 
the  word  '  Holden.'     Bean  v.  Arnold,  16  Maine,  251. 

8  Townsend  v.  Lorain  Bank,  2  Ohio  St.  345. 

♦  Union  Bank  v.  Hyde,  6  Wheat.  572.    See  also  Duvall  i'.  Farmers'  Banic, 


Sect.  2.]  INDORSEE'S  CONTRACT.  169 

But  the  term  'protest,'  in  its  legal  sense,  is  naturally  un- 
suited  to  any  step  required  in  the  law  of  inland  bills,  promissory 
notes,  and  cheques.  Still  it  is  plain  that  the  intention  in  a 
waiver  of  protest  in  such  cases  is  something  more  than  the  idle 
one  of  waiving  what  is  unnecessary;  and  hence  a  case  for  inter- 
pretation is  raised.  That  may  have  been  attended  to  by  the 
parties,  as  we  have  seen;  if  the  action  of  the  parties  has  not 
furnished  an  interpretation,  the  court  must  do  the  best  it  can. 
In  the  authority  from  which  the  last  example  is  taken,  it  was 
intimated  that  mere  naked  waiver  of  protest  would  not  excuse 
the  requirement  of  demand  and  notice  (and  it  would  not,  in  the 
case  of  a  foreign  bill) ;  but  it  has  been  decided  in  other  cases 
that  such  a  waiver  would  be  prima  facie  evidence  of  intention  to 
waive  demand  and  notice,  since  otherwise  it  would  have  to  be 
treated  as  having  no  effect  at  all.^  And  the  same  has  been  held 
of  the  anomalous  expression,  '  I  waive  demand  of  protest.'  * 
This  view  has  been  adopted  by  the  Statute.* 

Waivers  may  be  made  not  only  before  maturity,  but  after- 
wards as  well,  after  the  time  for  taking  the  steps  has  passed  and 
the  indorser  has  ceased  to  be  under  any  liability.*  Waiver  after 
It  is  a  peculiarity  of  certain  waivers,  of  which  this  "^^t^^^y- 
one  is  an  example,  that  their  validity  does  not  depend  upon  con- 
sideration or  the  doing  or  omitting  to  do  anything  in  reliance 
upon  them.  Still  when  made  after  maturity,  the  supposed 
waiver  must  h a v e"'Eeeir m ade"wTt1r''ftrti"irrr(5wred^~t ha t  the  i n- 
dorser  was  discharged,  in  order  to  avail.®     And  if  the  indorser 

7  Gill  &  J.  44 ;  s.  c.  9  Gill  &  J.  31  ;  Bird  v.  Le  Blanc,  6  La.  An.  470  ;  Scott 
V.  Greer,  10  Barr,  103. 

1  Coddington  v.  Davis,  1  Comst.  186;  Carpenter  v.  Reynolds,  42  Miss. 
807;  Townsend  v.  Lorain  Bank,  2  Ohio  St.  345  ;  Brown  v.  Hull,  33  Gratt.  233. 

2  Porter  v.  Kemball,  53  Barb.  467. 

3  N.  L  L.  §  118  :  'A  waiver  of  protest,  whether  in  the  case  of  a  foreign 
bill  of  exchange  or  other  negotiable  instrument,  is  deemed  to  be  a  waiver  not 
only  of  a  formal  protest  but  also  of  presentment  and  notice  of  dishonor.' 

*  N.  L  L.  §  116  ;  Sigerson  v.  Mathews,  20  How.  496  ;  Rindge  v.  Kimball, 
124  Mass.  209;  Matthews  v.  Allen,  16  Gray,  594  ;  Lewis  v.  Brehme,  33  Md. 
412;  Freeman  r.  O'Brien,  38  Iowa,  406. 

'  Ross  V.  Hurd,  71  N.  Y.  14  ;  Freeman  v.  O'Brien,  supra ;  Glidden  v. 
Chamberlin,  167  Mass.  486;  Third  Nat.  Bank  v.  Ashworth.  105  Mass.  503; 


170  BILLS,  NOTES,  AND   CHEQUES.  [Cuap.  XL 

should  actually  make  payment,  supposing  that  his  liability  haJ 
oeen  fixed  when  it  had  not,  lie  could  recover  the  money  back7 
If,  however,  the  facts  in  the  matter  were  known  to  the  indorser 
when  he  made  the  promise  to  pay,  or  other  waiver,  that  would 
he  enough ;  that  he  did  not  know  the  legal  effect  of  them  would 
not,  it  is  held,  help  him.- 

Next  of  excuse  not  by  way  of  waiver.  A  common  case  of  the 
kind  arises  where  the  maker  or  acceptor,  or  other  party  primarily 

Other  xcu  •  ^^^^^'^  ^^^  ^^^  maker  or  acceptor  may  have  signed 
transfer  of  for  accommodation),  places  an  available  fund  in  the 
hands  of  the  indorser  with  which  to  indemnify  him 
if  called  upon  to  pay,  the  fund  being  sufficient  for  the  purpose. 
Presentment  and  notice  are  deemed  unnecessary  in  such  a  case  ;  ' 
the  indorser  takes  the  place  of  the  one  primarily  liable.  There 
may  be  ground  for  doubting  whether  the  steps  could  be  omitted 
where  the  fund  was  insufficient  to  indemnify  the  indorser  ;  * 
though  it  seems  that  the  steps  may  be  omitted  where  the  entire 
estate  of  the  maker  or  acceptor  is  put  into  the  indorser's  hands 
to  indemnify  him  on  his  indorsement,^  for  in  such  a  case  too  the 
indorser  virtually  takes  the  place  of  the  principal  debtor. 

Clearl}',  however,  where  the  fund  in  question  is  put  into  the 
indorser's  hand  to  satisfy  demands  which  he  is  or  may  become 
absolutely  bound  to  pay,  the  steps  are  not  made  unnecessary. 
For  example :  The  defendant  is  indorser  and  the  plaintiff  holder 
of  a  promissory  note.     The  maker  has  before  maturity  made  an 

Sheridan  v.  Carpenter,  61  Maine,  83 ;  Walker  v.  Rogers,  40  IlL  278  ;  Dey  i;. 
Martin,  78  Va.  7. 

1  Sheridan  v.  Carpenter,  supra. 

2  Rindskopf  v.  Doman,  28  Ohio  St.  516  ;  Cheshire  v.  Taylor,  29  Iowa, 
492  ;  Glidden  v.  Chamberlin,  167  Mass.  486,  495  ;  Third  National  Bank  v. 
Ashworth,  105  Mass.  503  ;  Matthews  v.  Allen,  1 6  Gray,  594  ;  Givens  v.  Mer- 
chants' Bank,  85  111.  442,  444. 

3  Beard  v.  Westerman,  32  Ohio  St.  29  ;  Develing  v.  Ferris,  18  Ohio,  170  ; 
Ooddington  v.  Davis,  3  Denio,  16 ;  s.  c.  1  Comst.  186 ;  Kramer  v.  Sandford, 
A  Watts  &  S.  328  ;  Perry  v.  Green,  4  Harrison,  61  ;  Andrews  v.  Boyd,  3  Met. 
434;  Marshall  v.  Mitchell,  34  Maine,  227.  But  see  2  Daniel,  Neg.  Inst 
1125,  1143. 

*  See  Watkius  v.  Crouch,  5  Leigh,  522. 

•  Bond  V.  Farnham,  5  Mass.  170. 


Sbct.  2.]  INDORSEE'S   CONTRACT.  171 

assignment  of  his  property  to  the  indorser  in  trust  for  the  bene- 
fit of  his  creditors,  among  them  the  indorser,  to  secure  them 
against  all  debts  due  them  from  the  maker.  The  steps  for  fixing 
liability  are  omitted.  The  defendant  is  discharged  ;  the  proper 
interpretation  of  the  assignment  being  deemed  to  be  that  it  was 
intended  as  an  indemnity  against  absolute  liabilities  only. 
Hence  the  assignment  did  not  make  the  steps  unnecessary.^ 

It  may  be  too  that  to  excuse  the  steps,  the  fund  placed  in 
the  indorser's  hands  should  be  property,  or  securities  available 
immediately^,  such  as  bonds  payable  on  demand.  It  has  been 
held  that  the  putting  into  an  indorser's  hands  ordinary  choses 
in  action  as  collatei-al  security,  by  which  is  probably  meant 
choses  not  at  once  available,  will  not  excuse  the  steps. ^  So  if 
the  funds  in  the  indorser's  hands  have  arisen  from  business  in 
which  the  indorser  is  a  partner  with  the  maker  or  acceptor, 
there  is  no  sufficient  reason  for  omitting  the  steps,  especially 
where  such  funds  can  be  used  only  for  the  payment  of  paper  at 
maturity.^  So  also  where  the  funds  are  held  by  the  indorser  as 
executor  or  administrator  of  the  estate  of  the  maker  or  acceptor, 
they  cannot  be  considered  as  immediately  available  to  indemnify 
him;  they  are  not  put  there  for  that  purpose,  and  the  executor 
or  administrator  cannot  prefer  himself.* 

In  case  the  indorser  should  prove  to  be  the  primary  debtor  at 
the  outset,  the  maker  or  the  acceptor  having  acted  merely  for 
his  accommodation,  he  would  not  be  entitled  to  indorser  beine 
presentment  and  notice  any  more  than  if  he  had  primary  debtor, 
appeared  upon  the  paper  in  his  true  character.^  He  cannot 
suffer  prejudice  by  the  omission,  because  there  is  no  one,  party 
to  the  paper,  bound  to  indemnify  him,  or  if  there  be  one  liable 

1  Creamer  v.  Perry,  17  Pick.  332. 

2  Kramer  v.  Sandf'ord,  4  Watts  &  S.  328  ;  Seacord  v.  Miller,  3  Kern.  55  ; 
Otsego  Bank  v.  Warren,  18  Barb.  290. 

^  Kay  V.  Smith,  17  Wall.  411. 

*  Juniata  Bank  v.  Hale,  16  Serg.  &  R.  157  ;  Magruder  v.  Union  Bank, 
3  Peters,  87  ;  s.  c.  7  Peters,  287. 

^  Bank  of  Old  Dominion  v.  McVeigh,  26  Gratt.  785 ;  Witherow  v.  Slay- 
back,  158  N.  Y.  649,  660  ;  N.  I.  L.  §  87,  which  adds,  if  the  indorser  '  has  no 
reason  to  expect  that  the  instrument  will  be  paid  if  presented.' 


172  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XI 

with  him  as  principal  debtor,  there  is  no  one  whose  liability  he 
could  affect  by  notice  of  dishonor.  Indeed,  much  of  the  subject 
may  be  summed  up  by  the  statement  that  if  the  indorser  cannot 
possibly  be  prejudiced  by  the  omission,  the  omission  is  to  be 
excused.^  It  is  enough,  however,  to  require  the  steps  that  the 
indorser  may  suffer  prejudice  from  the  omission  of  them  ;  the 
indorser  is  not  required  to  show  that  he  has  suffered  prejudice 
by  the  omission  ;  it  is  for  the  plaintiff  to  show  that  the  indorser 
could  not  j)ossibly  have  suffered.^ 

The  fac^  tliot  ihe /KTCe,  bil),  or  che<)ue.  has  heen.  lost  does  Dot 
dispense  with  these  steps,  for  a  copy  may  be  used  in  making 
1x1990^  presentment,    with  an  offer  of   indemnity  against 

HmnfOMnr.        liability  upon  the  lost  instrument.*  ^ 

§  3.     Excuse  of  Presentment. 


%. 


Some  excuses  go  no  further  than  to  justify  the  omission  of 

presentment  and    demand,  or,   perhaps,    but  one   of  these  two 

_  Limited  waiver  steps,  for  it  is  to  be  remembered  that  presentment 

9  <**♦  ^'^''^se :  ^prefent-    ^^^  demand  are  separate  steps,  severally  required 

■<Ltr^  -  ment : demand.  Jq  \\^q  absence  of  legal  excuse;  and,   further,  ex- 

•        cuses  are  looked  upon  with  scrutiny,   and  not  allowed  unless 

I  |4np  V  ii^t  c  ^plainly  made  out. 

1^**^  •^  First,  in  regard  to  excuses  for  failing  to  make  presentment 

<^'**  ^  as  distinguished  from  demand.     Such  a  case  arises  where  the 

'••**•'<'***•   maker  or  acceptor,   understanding  or  professing  to  understand 
•0  the  errand  of  the  holder,  declines  to  see  the  paper,  or  expressly 

or  virtually  tells  the  holder  that  he  need  not  produce  it.     A  case 

1  Smith  V.  Miller,  52  N.  Y.  545  ;  Welch  v.  Taylor  Manuf.  Co.,  82  111.  579, 
drawer. 

2  Foster  v.  Parker,  2  C.  P.  D.  18  ;  alao  cases  in  note  1.  Many  of  the  cases 
relate  to  the  omission  of  notice  only,  but  the  principle  is  sufficient  to  cover  all 
the  steps. 

8  Lane  v.  Bank  of  West  Tennessee,  9  Heisk.  419.  Compare  Fales  v, 
Russell,  16  Pick.  315;  Tuttle  j;.  Standish,  4  Allen,  481  ;  Hopkins  i'.  Adams, 
20  Vt.  407 ;  Thayer  v.  King,  15  Ohio,  242.  These  are  cases  of  actions  sus- 
tained against  the  maker  of  lost  notes,  of  course  upon  copies  ;  it  follows  that 
presentment  may  be  made  upon  a  copy. 


Sbct.  3.]  INDORSEE'S   CONTRACT.  173 

of  the  kind  would  arise  where  the  maker  or  acceptor,  before  the 
paper  is  produced,  should  absolutely  repudiate  all  liability  upon 
it,  and  refuse  to  pay  it;  that  would  be  a  waiver  of  presentment, 
certainly  where  the  holder  called  for  payment  at  the  proper 
place,  as,  for  example,  at  the  counting-house  of  the  maker  of  a 
note '^^  perhaps,  it  would  be  a  waiver  wherever  demand  was 
made.^  Mere  refusal  of  payment,  however,  is  no  waiver  of 
omitting  presentment.  For  example  :  The  defendant  is  indorser 
and  the  plaintiff  holder  of  a  promissory  note.  At  maturity  the 
plaintiff,  not  having  the  note  with  him,  calls  upon  the  maker, 
and  demands  payment,  which  is  refused.  The  defendant  is 
discharged,  the  refusal  being  no  waiver  of  the  requirement  of 
presentment.® 

Excuse  of  demand  will  doubtless  excuse  presentment;  but, 
perhaps,  excuse  of  presentment,  in  the  special  sense  of  that 
term  which  distinguishes  it  from  demand,  would  not  make 
demand  unnecessary.  Waiver  of  presentment,  made  by  an 
indorser  after  maturity,  must  have  been  made  with  knowledge 
of  the  omission,  in  order  to  be  valid.* 

It  will  not  be  needful  to  separate  the  two  steps  further,  and 
accordingly  presentment  may  be  taken  as  including  demand.* 

Removal  of  the  maker  or  acceptor  from  the  State,   after  the ^ 

making  or  acceptance,    excuses  the   holder   from  any  duty  t4?  ftvOO^C 
follow  him,  such  as  would  rest  upon  the  holder  in  Efjgct  „£    %JUmkS-^tl^*M 
case  of   removal   to    some  other   place  within    the  removal.     VX4^iMi^  i# 
State  in  which  the  paper  is  payable.     The  removal  would  not, 
according   to    good  authority,®  though    there  is   also   contrary 

1  Waring  v.  Betts,  90  Va.  46. 

2  See  King  v.  Crowell,  61  Maine,  244. 
'  Arnold  v.  Dresser,  8  Allen,  435. 

*  Compare  ante,  p.  169. 

6  The  Statute  appears  to  speak  of  presentment  as  including  demand  ;  at 
any  rate  it  does  not  separate  the  two  acts,  in  speaking  of  excuses.  '  Present- 
ment for  payment  may  [why  laay  T\  be  dispensed  with  (1)  where  after  .  ,  . 
reasonable  diligence  presentment  as  required  by  this  list  cannot  be  made  ; 
(2).  where  the  drawee  is  a  fictitious  person  ;  (3)  by  waiver  of  presentment, 
express  or  implied.'     N.  I.  L.  §  89.     See  §  88  as  to  delay. 

«  Wheeler  v.  Field,  6  Met.  290. 


174  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XI 

authority,^  excuse  the  holder  from  making  presentment  at  the 
last  place  of  business  or  residence  of  the  maker  or  acceptor;  but 
presentment  there  would  clearly  be  sufficient.  For  example : 
The  defendant  is  indorser  and  the  plaintiff  holder  of  a  promi;;- 
sory  note  payable  generally  and  made  at  Troy,  New  York, 
where  the  maker  resided  at  the  time  of  making  the  note. 
Afterwards,  before  the  maturity  of  the  note,  the  maker  removes 
to  Florida,  where  he  resides  when  the  note  matures.  The 
plaintiff  makes  presentment  at  the  maker's  last  abode  in  Troy, 
and  not  receiving  payment,  gives  notice  of  dishonor  presently. 
No  presentment  in  Florida  is  made.  The  liability  of  the 
defendant  is  duly  fixed.^ 

*— » Concerning  the  effect  of  absconding  there  is  some  conflict  of 

•*-**-^^"'*"*'**authority.     The  more  general  doctrine  is  that  such  act  excuses 
i^^^"*"^         Effect  of  ^^^    holder  from    all    duty  to   make    presentment. 

(X  Q.rw>e  ^^^*'°"*^'"^-  For  example  :  The  defendant  is  indorser  and  the 
-C^  jilaintiff  holder  of  a  promissory  note,  the  maker  of  which,  before 
its  maturity,  absconds  to  parts  unknown;  whereupon  at  matur- 
ity, the  plaintiff,  without  taking  other  steps,  gives  notice  of 
dishonor  to  the  defendant.  The  defendant's  liability  is  duly 
fixed. ^ 

The  same  authorities,  however,  which,  in  case  of  removal  be- 
yond the  State,  require  presentment  at  the  last  abode  or  place  of 
Removal  be-  business,  recalling  the  doctrine  that  the  holder  is 
yoiid  the  State,  j^ound  to  exercise  due  diligence  in  endeavoring  to 
obtain  payment  from  the  maker  or  acceptor,  refuse  to  accept  that 
view  of  the  case.  These  authorities  require  the  plaintiff  to 
show  that,   notwithstanding  the  absconding,    he    has  exercise<l 

1  Foster  v.  Julien,  24  N.  Y.  28  ;  Gist  v.  Lybrand,  3  Ohio,  308.  See  Reid 
c.  Morrison,  2  Watts  &  S.  401. 

-  See  Taylor  v.  Snyder,  3  Denio,  145.  But  if,  as  was  the  actual  case  in 
Taylor  v.  Snyder,  the  maker  lived  at  the  time  of  making  the  note  in  another 
State  or  country  from  that  in  which  it  was  made,  presentment  there  would  be 
necessary.     See  ante,  p.  112. 

8  Lehman  v.  Jones,  1  Watts  &  S.  126 ;  Reid  v.  Morrison,  2  Watts  &  S. 
401 ;  Taylor  v.  Snyder,  supra  ;  Spies  v.  Gilmore,  1  Comst.  321  ;  Wolfe  v. 
Jewett,  10  La.  383.  The  same  rule  prevails  in  the  case  of  bills  of  exchange. 
Lehman  v.  Jones,  supra. 


Sect.  3.]  INDORSER'S   CONTRACT.  175 

some    diligence   in    order   to    obtain    payment    of    the    primary 
debtor;  sume  inquiry  should  be  made.^ 

The   insolvency  of  the  maker  or  acceptor,  though   known  to 
the  indorser  at  the  time  of  his  indorsement,  is  not  an  excuse  for 


&«^ 


(A^ 


failing  to  make  presentment.      For  example  :  The  Effect  ^f  jngoi.  9-^f^ 
defendant,    payee   of  an  overdue   promissory  note,   ^ency.  pijL>***«X4 

indorses  it  knowing  that  the  maker  is  insolvent,  the  plaintiff 
discounting  it  for  him  at  its  face  value.  Presentment  is  not 
made  within  reasonable  time.  The  defendant  is  discharged 
from  liability. '^ 

Waiving  notice  of  dishonor  does  not  excuse  the  holder  from 
making  presentment.  For  example :  The  defendant,  an  indorser 
(pf  a  promissory  note,  writes  before  or  after  his  sig-  Waiverof 
nature  the  words,  '  Waiving  notice.'  The  plaintiff,  notice, 
holder  of  a  note  at  maturity,  omits  to  make  presentment  of  the 
note,  for  payment  as  well  as  to  give  notice  of  dishonor.  The 
defendant  is  discharged.^ 

In  some  States,  contrary  to  the  rule  in  others,  the  fact  that 
the  maker  or  acceptor  has  deceased  at  the  time  of  the  maturity  ^ 
of  the  note  or  bill,  and  that  the  paper  matures  be-  Death  of  maker  ^^ 

fore  the  end  of  the  period  in  which  his  personal  or  acceptor, 
representative  is  exempt  from  liability  to  suit,  excuses  jiresent- 
ment  altogether.  For  example :  The  defendant  is  indorser  and 
the  plaintiff  holder  of  a  promissory  note  due  October  4.  The 
maker  dies  in  September  preceding,  administration  is  duly 
granted,  and  notice  thereof  is  given  the  same  month.  No  present- 
ment is  made  at  the  maturity  of  the  note  or  at  any  other  time 
to  the  administrator,  but  notice  of  non-payment  is  given  to  the 
defendant  in  due  season.  The  defendant's  liability  is  deemed 
fixed,  presentment  not  being  considered  necessary.^ 

^  Pierce  v.  Cate,  12  Gush.  195,  overruling  some  earlier  decisions  and  dicta, 

2  Bassenhorst  v.  Wilby,  45  Ohio  St.  333. 

'  Berkshire  Bank  v.  Jones,  6  Mass.  524;  Cases,  212.  See  also  Voorhies  v. 
Attee,  29  Iowa,  49;  Buchanan  v.  Marshall,  22  Vt.  561 ;  Lane  v.  Steward,  20 
Maine,  98;  Backus  v.  Shipherd,  11  Wend.  629.  But  see  Matthey  v-  Gaily, 
4  Cal.  62. 

■>  Hale  i;.  Burr,  12  Mass.  86.    See  Oriental  Bank  v.  Blake,  22  Pick.  206  j 


176  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XL 

-  If,  however,  the  paper  should  become  due  after  the  period  of 
exemption  has  passed,  presentment  should  he  made.^ 

The  Statute  thus  deals  with  excuse  touching  presentment  for 
acceptance :  Where  the  holder  of  a  hill  payable  elsewhere  than  at 
The  Statute  as  the  drawee's  place  of  business  or  residence  has  not 
to  excuses.  time,  by  reasonable  diligence,  to  present  the  bill 
for  acceptance  before  presenting  it  for  payment  on  the  day  it 
falls  due,  delay  in  presenting  the  bill  for  acceptance  before  pre- 
senting it  for  payment  is  excused,  and  does  not  discharge  the 
drawer  and  indorsers.^ 

Presentment  for  acceptance  is  excused,  and  the  bill  may  be 
treated  as  dishonored  by  non-acceptance  (1)  where  the  drawee  is 
dead,  or  has  absconded,  or  is  a  fictitious  person,  or  has  not  ca- 
pacity to  contract  by  bill;  (2)  where,  after  reasonable  diligence, 
presentment  for  acceptance  cannot  be  made;  (3)  where  though 
presentment  has  been  irregular,  acceptance  has  been  refused  on 
some  other  ground. ^ 

§  4.     Excuse  of  Pkotest. 

As  we  have  seen,  the  term  'protest,'  as  used  by  the  law  mer- 
chant, applies  only  to  foreign  bills  of  exchange,  though  by  .prae 
Proner  and  ex-  •t^'^o>  ^  <^^':^|'^»^'  the  sanction  of  statute  .lias  wi4ft4y 
tended  mean-  bj^gt^jcSS^it  has  come  to  be,  or  rather  it  has  long 
foreign  bills :  been,  applied  also  to  inland  bills,  promissory  notes, 
ot  er  paper.  ^^^^  cheques.  But  the  law  merchant  has  not  lost 
its  supremacy  in  the  matter;  the  protest  of  a  foreign  bill  hav- 
ing, as  we  have  seen,  a  significance  not  attaching  to  the  protest 
of  other  paper.  Protest  in  the  case  of  a  foreign  bill  is  one  defi- 
nite and  altogether  unique  act;  in  the  case  of  other  paper,  while 
it  naturally  points  to  the  same  unique  act,  it  has  come  to  be 
used  in  a  loose  and  vague  sense,  making  it  include  other  or  even 
all  the  steps  for  fixing  liabilit3\ 

The  consequence  is  that  excuse  of  protest  has  ordinarily  a 

Landry  v.  Stansbeny,  10  La.  An.  484.  Bat  see  Gower  v.  Moore,  25  Maine, 
16,  and  qu.  the  soundness  of  the  rule  in  Hale  v.  Burr.  It  would  seem  to  be 
merely  a  case  of  temporary  impediment  rather  thaa  permanent  excuse. 

1  Oriental  Bank  v.  Blake,  supra. 

3N.  LL.  §lf.4.  s  Id.  §155. 


Sect.  5.]  TNDORSER'S   CONTRACT,  tti..^ ^^k*^ju*^<^^^X~^,jr'%A 

definite  meaning  in  the  one  case,  and,  by  the  unwritten  law^  Cq  ^^^"^ 
uncertain  meaning  in  the  otlier.  Excuse  of  protest  of  a  foreign  f^xji.  U 
bill,  at  least  when  in  the  form  of  a  written  waiver,  such  as 
'waiving  protest,'  on  the  bill,  is  then,  apart  from  statute,  natu- 
rally to  be  taken  as  referring  to  the  distinctive  act  of  protest,  and 
nothing  else;^  unless  perhaps  the  term  has  received  a  different 
interpretation  in  the  practice  of  the  parties.^  On  the  other 
hand,  waiving  the  protest  of  paper  not  requiring  protest  is  an 
act,  as  has  just  been  stated,  of  doubtful  import;  how  it  has 
been  interpreted  by  the  courts  has  already  been  seen.^  By  the 
better  view  it  excuses  presentment  and  notice.*  By  the  Statute 
however,  n.s  wf>  havp  plapwlipr^  ct^pn  waiver  of  protest,  whether 
of  foreign  bills  or  other  negotiable  instruments,  is  a  waiver  of 


all  steps. ^  i'iDC 


§  o.     Excuse  of  Notice. 


What  is  referred  to  now,  as  in  the  case  of  excuse  of  present 
ment  above  considered,  is  excuse  of  notice,   excluding  cases  of 
excuse  of  notice  and  other  steps;  ^  in  other  words.  Subject  for  con- 
the  cases  now  referred  to   are    those  in  which  the  sirfcTsense  of 
only    question    raised    is    upon    the    failure  of  the  term, 
holder  or  indorser  to  give  notice  of  dishonor. 

Such  failure  is  not  justified  by  any  mere  waiver  of  present- 
ment or  demand,  for  such  a  waiver  may  be  made  in  confident 
expectation  that  the  maker  or  acceptor  will  be  Narrow  effect 
ready  and  anxious  to  pay,  and  will  therefore  offer  ^^  '^®  excuse, 
payment  without  waiting  to  be  requested.'  Nor,  it  seems,  will 
an  excuse  for  making  presentment,  created  by  law,  excuse  the 
requirement  of  notice.*  Thus  the  absconding  of  the  maker  or 
acceptor  to  parts  unknown,  though  in  some  States  making  pre- 

1  That  is  fairly  to  be  implied  from  language  in   Union  Bank  v.  Hyde, 
6  Wheat.  572.     See  also  Coddington  v.  Davis,  1  Comst.  186. 

2  Compare  Coddington  v.  Davis,  supra. 

^  Ante,  pp.  168,  169  ;  and  see  the  two  cases  just  cited. 
^  Id.  5  N.  I.  L.  §  118. 

*  For  those  cases  see  §  2,  supra. 

'Compare  Berkshire  Bank  r.  Jones,  6  Mass.  524.     But  waiver  of  '  notic* 
and  protest '  waives  demand.     Timberlake  it.  Thayer,  76  Miss.  76. 
»  Bank  of  Old  Dominion  v.  McVeigh,  26  Gratt.  755. 

12 


178  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XL 

sentment  unnecessary,  does  not  dispense  with  the  requirement 
of  notice.^  So  too  in  States  in  which  presentment  is  excused 
by  law  because  of  the  death  of  the  maker,  it  seems  that  in- 
dorsers  are  nevertheless  entitled  to  notice  of  non-paymentJ* 
And  a  personal  representative  of  an  indorser  deceased  is 
entitled  to  notice  as  much  as  would  the  indorser  himself  have 
been  had  he  lived.' 

Indeed,  omitting  to  give  notice  of  dishonor  is  no  more  lightly 
to  be  excused  than  is  omitting  to  take  any  of  the  other  steps 
required  by  the  law.  The  law  merchant  will  japt,  it  seems, 
excuse  an_£»mission  ^o  give  notice  except  upon  a  waiver  plainly 
having  in_yiew  the  veryjnatter  of  notice^  unless  it  is  clear  that 
notice  would  bgjof  no  use  whatever,  when,  indeedj  it  would  be  un-"" 
necessary  or  unless  after  reasonable  diligence  it  cannot^  given 
to  or  does  not^each  th^jparties^ to  be  charged.*  If  by  possibility 
the^h^orser  might  suffer  detriment  by  failing  to  give  hifa 
notice,   such  failing  will  discharge  him.^ 

Accordingly,   notice    of    dishonor  is  not   dispensed    with    by 

reason  of  the  fact  that  the  maker  or  acceptor  was  insolvent  all 

^     ,  ,     the  time,  and  that   the  indorser  was  aware  of  the 

Insolvency  of  '     ,  ; , 

maker  or  ac-  fact.  For  it  does  not  follow,  because  a  man  is 
^^'^  ^^'  insolvent  that  he  may  not  pay  a  particular  debt,  iri 

whole  or  in  part.  A  debtor  is,  within  certain  statutory  restric- 
tions, allowed  to  prefer  his  creditors  ;  and  even  where  his  funds 
have  passed  from  him,  as  into  the  hands  of  an  assignee,  friends 
may  be  ready  to  help  him  or  his  indorsers  in  the  particular  case." 

1  Foster  v.  Julien,  24  N.  Y.  28,  37;  Michaud  v.  Lagarde,  4  Minn.  43. 
Compare  Lehman  v.  Jones,  1  Watts  &  S.  126;  Cases,  211. 

2  See  Hale  v.  Burr,  12  Mass.  86,  88,  where  the  court,  speaking  of  demand 
upon  the  personal  representative  within  the  3'ear  of  his  exemption  from  suit, 
says  :  '  Such  a  demand  would  therefoie  be  merely  a  troublesome  formality, 
without  any  use  ;  and  notice  to  the  indorser  that  (the  promisor  being  dead) 
he  will  be  looked  to  for  payment,  will  in  every  respect  be  as  advantageous 
to  him  as  a  previous  demand  upon  the  promisor.' 

3  Oriental  Bank  v.  Blake,  22  Pick.  206. 

*  N.  L  L.  §  119,  as  to  the  last  clause  of  the  text.  As  to  delay  see  id. 
§  118. 

s  Foster  v.  Parker,  2  C.  P.  D.  18  ;  Smith  i-.  Miller,  52  N.  Y.  545 ;  Weleli 
V.  Taylor  Manuf.  Co.,  82  111.  579. 

«  Barton  v.  Baker,  1  Serg.  &  R.  334. 


^L^  ^4*^-#*^  O^u^Xt^  <^-«--^>M^  ^^^^    €-^-.#^^  tj-t>v^  cx-^ 

^^*^     SectCs.]        /  INDORSEE'S   CONTRACT.  179 

Even  in  the  case  of  an  express  waiver  of  notice,  the  waiving 
heretofore  suggested  should  be  borne  in  mind  where  the  waiver 
was  after  maturity;  in  such  a  case,  the  act,  to  be  Knowledge 
valid,   must  have  been  done   with  knowledge  that  "*  ^*<^t8- 
notice  had  not  been  given. ^ 

his  h  c  MefTT    O^fii^  en^ 

There  are  one  or  two  cases  of  excuse  of  notice  peculiar  in  that 
they  concern  only  the  drawers  of  bills  of  exchange  or  of  cheques. 
The  drawer's  contract  has  been  explained  in  a  pre-  „  ,. 

ceding  chapter,  and  it  was  there  shown  that  one  who  to  drawer  of 
draws  a  bill  without  reasonable  ground  to  believe 
that  it  will  be  honored  by  tlie  drawee,  or  a  cheque  without  hav- 
ing funds  to  meet  it,  is  treated  much  as  if,  instead  of  having 
drawn  a  bill,  he  had  made  a  promissory  note  for  the  sura. 
Hence  he  is  not  entitled  to  notice  in  case  of  dishonor.  The  case 
may  then  be  put,  and  commonly  is  put,  in  this  way;  that  the 
act  of  drawing  in  such  a  case  is  deemed  a  fraud  in  the  eye  of  the 
law,  and  notice  of  dishonor  is  accordingly  unnecessary.  This 
Bubject  has,  however,  been  fully  dealt  with  in  ('hapter  VII.,  and 
need  not  be  further  considered  here.  It  should  be  observed, 
however,  that  in  such  case  the  law  dispenses  with  notice  to  the 
drawer  only  ;  indorsers  must  still  be  notified,  for  they  are  no 
parties  to  the  fraud,  though  it  would  be  otherwise  of  an  Jn- 

dorser  who  is  the  drawer  of  the  bill. 

I  — ^ 

To  draw  upon  one's  self,  as  was  seen  in  Chapter  VII.,  also 
dispenses  with  the  requirement  of  notice,  and  perhaps  of  pre- 
sentment ;  and  so  of  cases  in  which  the  drawer  draws  upon  a 
partnership  of  which  he  is  a  member,  and  the  like  cases  re- 
ferred to  in  Chapter  VII.  In  these  cases,  too,  the  excuse  extends 
only  to  the  drawer;  an  indorser  (not  being  drawer)  is  still  en- 
titled to  notice. 

The  Statute,    beginning  with   the  case  of  the  drawer,  deals 
thus  with  the  subject:  Notice  of  dishonor  need  not  be  given  to 
the  drawer,  (1)  where  the  drawer  and  drawee  are  How  the 
the    same  person;   (2)    where  the  drawee  is  a  ficti-  ^j^h  the 
tious   person  or  a   person   not   having   capacity  to  subject, 
contract ;   (3)    where    the    drawer    is    the    person  to    whom  the 
'  1  Aute,  p.  169. 


180  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XL 

instrument  is  presented  for  payment;  (4)  where  the  drawer 
has  no  right  to  expect  or  require  that  the  drawee  or  acceptor 
will  honor  the  instrument;  (5)  where  the  drawer  has  counter- 
manded payment.^  It  then  declares  that  notice  need  not  be 
given  to  an  indorser,  (1)  where  the  drawee  is  a  fictitious  person 
or  a  person  not  having  capacity  to  contract,  and  the  indorser 
was  aware  of  the  fact  at  the  time  he  indorsed  ;  (2)  where  the 
indorser  is  the  person  to  whom  the  instrument  is  presented  for 
payment ;  (3)  where  the  instrument  was  made  or  accepted  for 
his  accommodation.'^  And  where  due  notice  of  dishonor  by  non- 
acceptance  has  been  given,  notice  of  a  subsequent  dishonor  by 
non-payment  is  unnecessary  unless  meantime  the  instrument  has 
been  accepted.^ 

1  N.  L  L.  §  121 ;  ante,  pp.  71-75. 

2  Id.  §  122 ;  American  Bank  v.  Junk,  94  Tenn.  624.     So  of  accommodation 
maker.    Carlton  v.  White,  99  Ga.  384. 

»  N.  1.  L.  §  123. 


•k^j 


Chap.  Xll.]  VENDOR'S  CONTRACT.  181 


CHAPTER  XII. 


VENDOR'S   CONTRACT.  ^^-^  *^  ,  i\AAA^-i^^  1 

There  is  one  contract  arising  from  an  instrument  of  the  law^*-**^''^ 
merchant  which,  paradoxically  as  the  statement  sounds,  is  sub- 
stantially a  contract,  or  the  equivalent  of  a  contract,  Contract  of 
of  the  common  law  ;  the  contract,  namely,  of  the  co"™°ion  law. 
holder  of  a  negotiable  instrument  who  for  value  transfers  his 
title  by  delivery,  that  is,  without  indorsement,  or  by  delivery 
with  qualified  indorsement  as  '  without  recourse.' 

In  its  nature  and  incidents  such  a  transaction  is  like  a  sale  by 

the  common  law  ;  the  contract  entered  into  with  the  transferee 

is  the  contract  of  a  vendor  at  common   law.^     The  „ 

Nature  and 

special  liability  of  an  indorser,  as  already  described,    incidents  as 

rill  in  sale. 

IS  01  course  excluded. 

The  law  is  thus  stated  by  the  Statute,  which  conforms  to  th^ 
unwritten  law:  Every  person  who  negotiates  an  instrument  by 
delivery  (only),  or  by  a  qualified  indorsement,  warrants  (1)  that 
the  instrument  is  genuine,^  and  in  all  respects  what  it  purports 
to  be;  (2)  that  he  has  a  good  title  to  it ;  ^  (3)  that  all  prior  par- 
ties had  capacity  to  contract ;  *  (4)  that  he  has  no  knowledge  of 
any  fact  which  would  impair  the  validity  of  the  instrument  or 
render  it  valueless.*  ^k./-^  dt-ire^  *fc-*^^  ««^*'v--k-^<-<_«»   ' f^ 

1  Meyer  v.  Richards,"!  63  U.  S.  385. 

»  Littauer  v.  Goldman,  72  N.  Y.  506  ;  Bell  v.  Dagg,  60  N.  Y.  528  ;  Cool- 
idge  V.  Brigham,  5  Met.  68  ;  Clarke  v.  Patrick,  60  Minn.  269. 

»  Meriden  Bank  v.  Gallaudet,  120  N.  Y.  298. 

*  Littauer  v.  Goldman,  supra. 

^  N.  I.  L.  §  72.  Provision  (3)  does  not  apply  to  persons  negotiating  pub- 
lic or  corporate  securities  other  than  bills  and  notes.  Id.  ;  Otis  v.  CuUum,  92 
TJ.  S.  448. 


182  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  Xlt 

When  the  transfer  is  by  delivery  only,  the  warranty  is  a  pure 

warranty  of  the  common  law ;  accordingly  it  is  not  negotiable, 

-,  ,  .         extending  only  to   the   holder's   immediate   trans- 

Nature  of  the  .         . 

warrant}-:  not    ferree.^    Qualified  indorsement,  like  special  or  blank 
indorsement,  is  of  course  negotiable,  and  hence  the 
warranty  passes  to  all  subsequent  holders  in  due  course. 

It  has  sometimes  been  considered,  under  the  unwritten  law, 
that  there  was  a  distinction,  in  regard  to  the  warranty  of  genu- 
Sale  and  trans-  ineness,  between  cases  in  which  the  instrument  was 
ter  for  security,  g^j^  g^j^^  cases  in  which  it  was  transferred  in  pay- 
ment of  a  debt  due  or  then  created  or  to  secure  a  debt.  In  the 
former  case  it  has  been  thought  that  the  common  law  doctrine  of 
caveat  emptor  should  apply,  and  that  the  buyer  should  be  treated 
as  having  bought  at  his  own  risk  ;  the  warranty  being  applicable 
only  to  the  second  case.^  But  the  distinction  has  been  more 
generally  considered  as  not  well  taken,  and  the  warranty,  as  in 
the  Statute,  held  to  cover  both  cases. ^ 

On  the  other  hand  there  has  been  some  disagreement  upon  the 
question  whether  the  warranty  should  not  extend  to  the  solvency 
Warranty  as  "^  ^^"6  parties  primarily  liable.  Some  courts  hold 
to  solvency.  ^j^^^^  j^.  should,  where  the  pajier  was  worthless,  though 
genuine,  when  passed,  and  the  transferee  took  it  without  notice, 
though  the  seller  was  also  ignorant  of  the  fact  ;  *  other  courts 
deny  any  such  warranty.^  The  latter  is  probably  the  better  doc- 
trine ;  the  Statute  is  silent  on  the  subject. 

1  N.  L  L.  §  72. 

2  Baxter  v.  Duren,  29  Maine,  434,  440  ;  Fisher  v.  Rieman,  12  Md.  497,  re- 
versing 4  Am.  Law  Reg.  433  ;  Buddecke  v.  Alexander,  20  La.  An.  563. 

'  Hussey  v.  Sibley,  66  Maine,  192,  196,  overruling  Baxter  v.  Duren,  supra. 
See  Cabot  Bank  v.  Morton,  4  Gray,  156  ;  Merriam  v.  Wolcott,  3  Allen,  258  ; 
Bell  V.  Dagg,  60  N.  Y.  528 ;  Allen  v.  Clark,  49  Vt.  390 ;  Bankhead  v.  Owen, 
60  Ala.  457  ;  Bell  v.  Cafferty,  21  Ind.  411  ;  Thompson  v.  McCuUough,  30  Mo. 
224  ;  Gurney  v.  Womersley,  4  El.  &  B.  133. 

*  Bayard  v.  Shunk,  1  Watts  &  S.  92  ;  Ware  v.  Street,  2  Head,  609  ;  Ed- 
mund V.  Digges,  1  Gratt.  359,  and  other  cases. 

6  Ontario  Bank  v.  Lightbody,  13  Wend.  101  ;  Fogg  v.  Sawyer,  9  N.  H. 
365  ;  Frontier  Bank  v.  Morse,  22  Maine,  88  ;  Harley  v.  Thornton,  2  Hill  (So. 
Car.),  509  ;  Townsends  v.  Bank  of  Racine,  7  Wis.  185  ;  Westfall  v.  Braley,  10 


(Chap.  XII.]  VENDOR'S   CONTRACT.  183 

The  warranty  in  question  arises  of  course  by  implication  of 
)aw,  and  is  only  presumptive  except  perhaps  in  the  case  of  qual- 
ified   indorsement.      The    transferrer   by    delivery  ,„, 

•'  ''     The  warranty 

may  therefore  show  that  as  a  matter  of  fact  he  re-  only  presum'p- 
f used  to  warrant,  ^  or  that  the  warranty  was  modified 
in  the  negotiation,  or  that  some  other  agreement  was  substituted 
for  it.     In  the  case  of  qualified  indorsement  it  may  be  doubted 
whether  any  such  evidence  would  be  admissible  unless  it  was 
reduced  to  writing. 

The  Statute  also  provides  that  a  broker  or  other  agent  who 
negotiates  an  instrument  without   indorsement  incurs  all  the 
liabilities    of    warranty,    unless    he    discloses    the  Brokers  and 
name  of  his  principal  and  the  fact  that  he  is  act-  °^^®'"  *g^°^*- 
ing  only  as  agent.** 

Ohio  St.  188  ;  Magee  v.  Carmack,  13  111.  289  ;  Timmins  v.  Gibbins,  18  Q,  B. 
72,  and  other  cases. 

1  Bell  V.  Dagg,  60  N.  Y.  528.  General  refusal  to  answer  for  the  instrument 
would  however  be  consistent  with  an  implied  warranty  of  genuineness.    Id. 

3  N.  I.  L.  §  76. 


184  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XI [I. 


CHAPTER  Xm. 
ACCOMMODATOR'S   CONTRACT. 

§  1,     Nature  :  Consideration  :  Suretyship. 

The  legal  effect  of  each  of  the  contracts  dealt  with  in  the 
foregoing  chapters,  except  the  last  one,  will  be  modified  some- 
what, if  it  appears  that  the  defendant  signed  the 
Meaning  of  ^  '^  •  i  •         r         i 

accommodation  instrument  without  consideration  for  the  accommov 

dation  of  another  party.  The  result  is  an  accom- 
modation contract,  which  may  be  described  as  a  gift  by  A  to  B, 
of  A's  credit,  to  be  offered  to  another  on  payment  of  value.  A 
contract  of  the  kind  may  take  any  of  the  forms  of  the  law  mer- 
chant;  a  promissory  note  maybe  made  or  indorsed  for  accommo- 
dation ;  a  bill  of  exchange  may  be  drawn,  accepted,  or  indorsed 
for  accommodation;  a  cheque  may  be  drawn  or  indorsed  for 
accommodation.  In  a  word,  any  party  to  the  instrument  may 
be  an  accommodation  party.^ 

Accommodation  contracts  of  the  kind  are  contracts  of  the  law 
merchant  as  much  as  are  those  which  are  supported  by  a  valua- 
A  contract  of  ^^®  consideration  at  the  outset.  At  the  outset,  we 
law  merchant,  gg^y^  fgp  though  accommodation  contracts  are  not  so 
supported  when  first  executed,  a  valuable  consideration  must 
spring  up  afterwards  to  make  the  contract  binding  ;  some  one 
afterwards  must  have  taken  the  paper  for  value  in  order  to  have 
a  claim  upon  the  accommodation  party.  For  example  (hypothet- 
ical) :  The  defendant  accepts  a  bill  of  exchange  for  the  accom- 
modation  of  the  drawer,  and  the  drawer  makes  a  gift  of  the  bill 

*  N.  L  L.  §  36  :  '  An  accommodation  party  is  one  who  has  signed  the  instru- 
ment as  maker,  drawer,  acceptor,  or  indorser,  without  receiving  value  therefor, 
and  for  the  purpose  of  lending  his  name  to  some  other  person.' 


Sect,  l.]  ACCOMMODATOR'S   CONTRACT.  185 

to  the  payee  and  plaintiff.     The  defendant  is  not  liable  upon  hia 
acceptance.^ 

There  is  then  nothing  peculiar  in  the  case  so  far.  Nor  i» 
there  anything  peculiar  in  any  other  phase  of  the  contract  of 
an  accommodation  party  under  the  law  merchant  peculiarity  of 
in  its  ordinary  application.  Whatever  would  be  tlie  contract, 
necessary  to  make  a  case  against  one  who  had  signed  originally 
for  value  is  equally  necessary  to  make  a  case  against  an  accom- 
modation party ;  and  whatever  would  be  effective  against  a  party 
who  signed  for  value  will  also  be  effective  against  an  accommo- 
dation party  after  a  consideration  has  sprung  up.  What  is 
peculiar  to  the  situation  of  such  a  party  lies  in  the  fact  that  he 
is  in  a  certain  sense  only  a  surety  for  the  party  for  whom  he  has 
given  his  credit.  Whatever  the  outward  form  of  the  contract, 
even  though  the  accommodation  party  made  as  such  his  promis- 
sory note,  and  the  person  for  whose  accommodation  it  was  made 
is  an  indorser  of  it,  or  indeed  is  not  a  party  to  it  at  all,  the  ac- 
commodated party  or  person  is,  between  the  two,  the  principal 
debtor,   and  the  accommodation  party  the   surety."'' 

The  accommodation  party  is  a  surety,  however,  not  always  in 
the  full  sense,  but  often  only  sub  modo.  It  appears  to  have 
been  considered  at  one  time  that  he  was  in  all  ^^^  fjj^  a 
cases  a  surety  in  the  full  ordinary  sense  ;  but  the  surety. 
authorities  now  consider  that  the  suretyship  may  be  essentially 
modified  by  the  natural  character  of  this  particular  contract 
made  by  the  accommodation  party.  Thus,  if  a  person  ban 
accepted  a  bill  of  exchange  for  the  accommodation  of  the  payee, 
a  subsequent  indorsee,  though  with  notice,  may  still  treat  him 
as  an  acceptor,  not  merely  in  point  of  liability  in  the  ordinary 
way  of  acceptance,  but  also  in  regard  to  the  more  special  ques- 
tions of  suretyship,  because  he  has  taken  a  principal's  position. 
That  is  to  say,  the  acceptor  is  not  a  surety  towards  the  holder, 
though  the  holder  knows  that  he  accepted  for  accommodation  ; 
he  is  a  surety  only  between  himself  and  the  party  for  whose 
accommodation  he  accepted.  Accordingly,  he  will  not  be  dis- 
charged by  acts  of  the  holder,  which  would  discharge  him  if  he 

1  N.  I.  L.  §  36,  as  just  cited. 

2  Burton  v.  Slaughter,  26  Gratt.  914. 


l?^n  BILLS,  NOTES,  AND    CHEQUES.  [Chap.  XHI 

were  an  ordinary  surety,  or  if  he  were  an  accommodation  in.' 
dorser  ;  for  an  indorser  is  a  surety  for  parties  before  him.^ 
.  A  person  may  lend  his  name  to  another  for  value,  as  an  'ac- 
commodation' in  a  popular  sense;  but  lending  will  not  be 
accommodation  in  the  sense  of  the  law  merchant  unless  it  was  a 
gratuity.^  If  the  lending  was  for  value,  the  paper  is  ordinary 
business  paper ;  as  much  as  if  there  had  been  no  '  accommoda- 
tion '  at  all.  Thus,  persons  may,  for  each  other's  aid,  exchange 
their  own  promissory  notes,  each  for  instance  taking  a  note 
payable  to  the  order  of  the  other,  of  the  same  amount;  and  the 
exchange  made,  each  note  becomes  an  instrument  for  value. 
The  exchange  has  converted  accommodation  paper  in  proper 
sense  into  business  paper,  and  the  makers  of  each  are  now  liable 
as  principal  debtors.^ 

§2.     Taking  WITH  Notice^ d^ /I ceo A\A\0<lllT#' 

There  is  anotne?  doctrine  touching  accommodation  acceptanc^^/*.?Mu 

-ftKjrt^tfij^a?5?p,   and   that   is,    that    though  the   undertaking  isgi^lL^k^ 

^ (originally)  without  consideration,  it  stands  upouviv.., 

Distinguished      ^       ^    .       ''^       .  ,...  '        ,  ^     i**-^* 

from  otiier         a   footing  radically   different   from  other  cases   of 

cases  of  notice.  ,        ,  ,•  *j        j.-  Tr  i 

contracts  wanting  consideration.     It  a  man  makes 

a  promissory  note,  accepts  a  bill  of  exchange,  or  indorses  paper, 

upon  the  supposition  that  there  is  a  valuable  consideration  for 

his  undertaking  when  there  is  not,  or  if  there  is  a  failure  of  the 

consideration,  a  person   taking  the  paper  with  notice,  though 

for  value,  cannot  hold  him  (with  an  exception  which  need  not 

be  mentioned  here);  whereas  if  the  party's  undertaking  was  for 

accommodation,  he  would  be  liable,  though  the  holder  did  take 

1  See  post,  p.  259. 

2  peale  v.  Addicks,  174  Penn.  St.  543  ;  Peoria  Manuf.  Co.  v.  Huff,  45  Neb. 
7;  N.  L  L.  §36. 

8  State  Bank  v.  Smith,  155  N.  Y.  185.  See  also  Merchants'  Bank  v.  Cum- 
mings,  149  N.  Y.  360  ;  Hapgood  v.  Wellington,  136  Mass.  217.  So  where  A 
lends  his  own  note  to  B,  and  B  gives  to  A  his  (B's)  note  for  security,  A  holds 
B's  note  for  value,  and  it  is  well  held  may  sue  upon  it  before  being  compelled 
to  pay  his  own.  Merchants'  Bank  v.  Cummings,  supra  ;  Hapgood  v.  Welling- 
ton, supra  ;  Russell  v.  La  Roque,  11  Ala.  352.  But  see  Osgood  v.  Osgood,  39 
N.  H.  209  ;  Child  v.  Powder  Works,  44  N.  H.  354. 


Sfot.  2.] 


ACCOMMODATOR'S   CONTRACT. 


187 


the  paper  with  notice  or  even  with  full  knowledge,  if  he  took  it 
for  vatue,  before  maturity.^ 

The  reason  is  not  far  to  seek.  Where  the  undertaking  is  for 
accommodation,  the  party  makes  an  offer  by  way  of  gift,  with 
full  understanding,  of  his  credit,  intending  to  respond  to  any 
one  who  acts  upon  the  offer  ;  where  the  undertaking  is  supposed 
by  the  party  making  it  to  be  for  value  when  it  is  not,  or  when 
the  value  fails,  he  has  acted  in  mistake,  never  intending  to  bind 
himself  with  consideration  wanting. 

In  the  doctrines  relating  to  suretyship  and  consideration  are 
found  the  characteristic  features  of  accommodation  contracts. 
The  object  of  the  present  chapter  is  only  to  call  attention  to  and 
explain  the  general  features  of  such  contracts,  as  one  of  the 
forms  of  contract  of  the  law  merchant,  to  show  that  there 
are  such  contracts,  and  what  in  general  they  are.  The  details 
concerning  them  will  be  dealt  with  more  conveniently',  as  details 
of  the  same  nature  arise  in  connection  with  the  other  contracts 
of  our  subject.  Thus,  dealings  with  the  principal  debtor  in 
their  effect  upon  subsequent  parties,  the  extent  of  the  liability 
of  accommodation  parties,  and  other  matters  of  detail  will  be 
considered  in  later  chapters. 

1  N.  I.  L.  §  36  ;  Maffat  v.  Greene,  149  Mo.  48.  See  Merchants'  Bank  v. 
Cummings,  149  N.  Y.  360.  If  the  accommodation  instrument  was  taken  from 
the  accommodated  party,  after  maturity,  the  case  will  of  course  be  different. 
Peak  V.  Addicks,  174  Penn.  St.  549  ;  Chester  v.  Dorr,  41  N.  Y.  279  ;  Kellogg 
».  Barton,  12  Allen,  527. 


^U^' 


^L*^--***"*^*^ 


188  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XIV. 


CHAPTER   XIV. 

ASSURER'S   CONTRACT. 

§  1.     Annexing  Contkacts  of  the  Common  Law:    Guar- 
anty AND  Suretyship. 

Thus  far  we  have  had  under  consideration  contracts  of  the 
law  merchant,  with  but  occasional  reference  to  contracts  of  the 
Subiect  for  common  law  annexed  to  or  connected  with  them, 
consideration.  '^£]]q  first-named  contracts  having  been  severally  ex- 
plained, with  reference  to  their  peculiarities,  nothing  further 
would  remain  but  a  consideration  of  features  common  to  them 
all,  were  it  not  that  it  often  happens,  as  has  already  been  in- 
timated in  these  pages,  that  some  contract  of  the  common  law, 
in  the  way  of  further  assuring  performance  of  the  contract  of  the 
law  merchant,  has  been  added.  The  effect  of  adding  such  a  con- 
tract, not  upon  the  contract  assured,  for  that  remains  unaffected, 
but  upon  the  common  law  contract  itself,  is  now,  or  will  from 
time  to  time  become,  a  matter  of  importance.  But  in  order  to 
understand  how  far  the  assuring  contract  has  been  affected  by 
its  connection  with  a  contract  of  the  law  merchant,  we  must 
first  ascertain  the  very  nature  of  the  assuring  contract  itself, 
that  is,  its  natural  ordinary  character,  uninfluenced  by  such 
connection. 

Two  terms  are  used  to  signify  further  assurance,  namely, 
guaranty  and  suretyship;  to  which  should  be  added  the  executed 
Guaranty  and  assurance  of  mortgage.  Guaranty  and  suretyship 
suretyship.  g^j-g  terms  often  loosely  employed,  the  one  for  the 
other,  and  each  made  to  express  a  certain  broader  meaning  than, 
strictly  taken,  it  should  bear.  That  is  especially  true  of  the 
use  of  the  term  surety  or  suretyship.  But  there  are  situations 
of  fact  which  are  followed  by  very  different  rules  of  law,  and 


Sect.  2.]  ASSURER'S  CONTRACT.  189 

these  coincide  with  the  meaning  of  the  two  terms  in  their  nar- 
rower and  more  specific  sense;  at  all  events,  it  will  serve  a  pur- 
pose of  convenience,  and  at  the  same  time  prevent  confusion,  if 
we  use  the  two  terms  in  the  more  specific  sense  conforming  to 
th«  situations  of  fact  referred  to.^ 

Accordingly,  we  may,  in  the  first  place,  unite  the  terms  guar- 
anty and  suretyship  under  the  general  designation  of  contracts 
of  assurance,  by  which  will  then  be  meant  any  subsidiary  con- 
tract intended  to  secure  the  performance  of  the  contract  or  con- 
tracts assured.  Then  we  may  separate  the  contract  of  assurance 
into  two  parts;  first,  supposing  the  assurance  to  be  made  as  a 
separate  and  distinct  collateral  engagement,  to  which  the  name 
guaranty  may  be  and  commonly  is  given,  —  guaranty,  that  is, 
in  the  specific  sense;  secondly,  supposing  the  assurance  to  be 
part  and  parcel  of  the  contract  assured,  being  an  engagement 
then  to  which  the  name  suretyship  may  be  and  commonly  is 
given,  —  suretyship,  that  is,  again  in  the  specific  sense.  We 
shall  find  important  legal  consequences  flowing  from  that  divi- 
sion. But  both  guaranty  and  suretyship  are  undertakings  t<) 
answer  '  for  the  debt  or  default  of  another '  within  the  meaning 
of  the  Statute  of  Frauds,  and  must  accordingly  be  in  writing 
and  signed  by  the  party  to  be  bound  or  by  his  lawful  agent. 

The  nature  and  incidents  of  the  contracts  will  appear  in  the 
two  following  sections. 

§  2.     Guaranty  (in  specific  sense). 

Proceeding  to  the  subject  of  guaranty  in  the  specific  sense  of 
a  separate  contract,  it  is  obvious  that  the  assuring  contract  may 
be  made  either  at  the  same  time  with  the  contract  Yme  of  guar- 
or  contracts  assured,  or  afterwards,  —  or,  indeed,  *"*y- 
before  the  principal  contract  was  made  ;  but  cases  of  that  kind 
are  infrequent,  and  would  raise  no  peculiar  legal  questions.  The 
time  of  the  guaranty  raises  certain  questions  in  regard  to  con- 
sideration. It  should  be  observed  that  both  the  guaranty  and 
the  contract  assured  must  be  supported  by  a  valuable  considera- 

^  On  the  difference  see  Saint  v.  Wheeler  Co.,  36  Am.  St.  Rep  210  and 
note. 


190  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XI^ 

tion.  If  the  contract  assured  is  wanting  in  that  respect,  the 
guaranty  must  fall  to  the  ground,  though  itself  founded  upon  a 
valuable  consideration;  and  on  the  other  hand,  though  the  con- 
tract assured  is  well  supported  in  that  respect,  if  the  guaranty- 
is  not  well  supported  also,  it  must  fail.  The  connection  of  the 
guaranty  with  a  contract  of  the  law  merchant  in  no  way  affects 
the  case. 

Where,  however,  the  guaranty  is  made  at  the  same  time,  that 
is,  in  the  same   general   negotiations  and  substantially  at  the 

same  time  with  the  principal  contract  of  the  law 
Conteraporane-  -^  ^ 

ous  guaranty:     merchant,    it   is   not   necessary   that   it   should  be 

consideration.  ,ti  ,  -li-r  j.-l    ^ 

supported  by  any  separate  consideration  from  that 

of  the  principal  engagement.^  Both  contracts  being  made  at 
the  same  time,  it  matters  not  that  the  consideration  more  im- 
mediately and  fully  belongs  to  the  principal  one  ;  the  guaranty, 
though  separate  in  form,  in  terms,  and  in  effect,  makes  part  of 
a  genera]  consideration  ;  in  other  words,  in  common  language  of 
the  books,  the  consideration  which  supports  the  principal  coit- 
tract  supports  the  guaranty. 

At  this  point  it  is  necessary  to  guard  against  a  possible  mis<- 
take.  Does  the  guaranty,  in  the  entire  absence  of  evidence  bf 
consideration,  now  draw  from  the  contract  of  the  law  merchant^ 
which  it  assures,  any  of  its  properties?  In  a  suit  upon  the 
contract  assured,  the  law  merchant,  as  we  have  seen,  raise»sa 
presumption  of  consideration  to  support  the  instrument  when 
produced  at  the  trial  ;  does  this  presumption  flow  over  to  the 
guaranty  ?  The  answer  is  not  clear  ;  but  on  the  theory  that  the 
law  should  be  founded  on  custom,  it  may  perhaps  be  in  the'rieg- 
ative,  for  there  is  no  custom  touching  the  point.  According  to 
this  view  the  guaranty  has  gained  nothing  from  its  connection 
with  the  more  favored  contract,  and  all  consideration  to  support 
the  guaranty  should  then  be  proved  as  in  other  cases  of  con- 
tracts of  the  common  law,  supposing  that  it  is  not  under  seal. 
But  it  more  generally  happens  that  the  principal  contract,  for 
instance  a  promissory  note,  recites  a  consideration  for  that  con- 
tract, as  by  the  words  '  For  value  received';    in  which  case  It 

1  Osborne  v.  Gullikson,  64  Minn.  218. 


Sect.  2.]  ASSURER'S  CONTRACT.  191 

seems  that  the  same  evidence  may  be  passed  on  to  support  the 
guaranty.^ 

Let  it  next  be  supposed  that  the  guaranty  is  made  at  some 
other  time,  after  the  making  of  the  principal  contract.  Now  it 
follows  from  the  very  requirement  of  a  considera-  Subsequent 
tion  to  support  the  guaranty,  that  there  must  be  a  guaranty, 
separate  consideration  to  support  the  assuring  engagement;  that 
the  consideration  which  supports  the  principal  contract  will  not 
support  the  guaranty.^  There  are  one  or  two  apparent  excep- 
tions ;  first,  where  the  guaranty  was  agreed  upon  at  the  time  of 
making  the  principal  contract,  and  it  was  merely  committed  to 
writing  afterwards,  nunc  pro  tunc ;  ^  and  secondly,  where  the 
consideration  is  a  continuous  thing,  running  along  at  the  time 
both  of  the  principal  contract  and  of  the  guaranty,  as  in  the 
case  of  the  guaranty  of  fidelity  of  a  clerk  for  a  year.^ 

Another  question  now  arises  touching  consideration,  to  wit, 
whether  the  interpretation  to  be  put  upon  the  Statute  of  Frauds 
in  regard  to  the  necessity  of  a  statement  of  consid-  statute  of 
eration  in  the  guarant}^  is  affected  by  the  fact  that  Frauds, 
the  contract  assured  is  a  contract  of  the  law  merchant,  by  whidh 
there  is  a  presumption  of  consideration.  The  answer  is  prob- 
ably in  the  negative.  If,  according  to  the  interpretation  put 
upon  the  Statute  of  Frauds  in  a  particular  State,  or  according  to 
special  legislation,  it  is  necessary  in  other  cases  that  the  guar- 
anty itself  should  recite  or  refer  to  a  consideration,  it  is  equally 
necessary  in  the  case  of  a  guaranty  of  a  bill,  note,  or  cheque  ; 
unless  the  instrument  assured  contains  a  recital  of  consideration 
and  is  contemporaneous  within  the  guaranty.* 

*  Bickford  v.  Gibbs,  8  Cash.  154.  Perhaps  on  the  whole  this,  rather  than 
custom,  is  the  true  view,  and  covers  the  whole  case.  For  whatever  proves 
even  but  presumptively,  a  consideration  to  support  the  principal  contract 
proves  enough  for  the  guaranty.  ' 

2  Tenney  v.  Prince,  4  Pick.  385 ;  Green  v.  Shepherd,  5  Allen,  589,  59!  ; 
Moses  V.  Lawrence  Bank,  149  U.  S.  298  ;  Gases,  221.  :; 

3  Hawkes  v.  Phillips,  7  Gray,  284.  ■, 

*  See  Tenney  v.  Prince,  supra;  Moies  v.  Bird,  11  Mass.  436  ;  Leonard  u 
Wildes,  36  Maine,  265. 

s  Moses  V.  Lawrence  Bank,  149  U.  S.  298  ;  Cases,  221. 


•^ 


192  BILLS,  NOTKS,   AND   CHEQUES.  [Chap,  XIV. 

indeed  in  some  States  language  indicating  a  consideration 
should  aj)pear  within  the  guaranty  in  any  case,  and  it  will  not 
be  enough  that  such  language  is  found  in  the  contract  assured. 
For  example  (hypothetical) :  The  defendant  sued  upon  a  guar- 
anty writes  the  following  words  upon  the  back  of  a  promissory 
note,  the  contract  being  performable  in  the  State  of  New  York: 
'  I  guaranty  the  payment  of  this  note.'  The  face  of  the  note 
reads  '  For  value  received  I  promise  to  pay  to  A,  or  order,'  etc. 
The  defendant,  by  the  law  of  New  York,  is  not  liable,  there 
being  no  reference  to  consideration  in  the  guaranty. 

In  other  States  the  law  is  satisfied  if  there  is  a  reference  to 
consideration  in  the  principal  contract,  as  by  the  words  *  For 
value  '  used  in  the  last  example.  In  still  other  States  it  is  not 
necessary  that  there  should  be  any  statement  of,  or  reference  to, 
consideration  in  either  the  principal  contract  or  the  guaranty; 
it  is  enough  that  a  consideration  to  suj^port  the  guaranty  existed 
in  fact,  and  the  fact  may  be  shown  at  the  trial. ^ 

We  may  now  inquire  whether  a  guaranty  is  by  such  connec- 
tion with  a  negotiable  instrument  affected  in  the  second  peculiar 
Negotiability  feature  of  the  law  merchant,  to  wit,  negotiability. 
«f  guaranty.  j^  regard  to  that,  it  should  be  noticed  that  the 
question  whether  a  guaranty  becomes,  or  can  become,  negotiable 
by  being  annexed  to  a  negotiable  note,  bill,  or  cheque,  has  two 
phases.  The  question  may  be  (1)  whether  the  guaranty,  when 
written  upon  the  note,  bill,  or  cheque,  operates  like  an  indorse- 
ment, to  give  a  remote  subsequent  holder  the  rights  of  an  in- 
dorsee against  the  guarantor  as  if  an  indorser ;  or  it  may  be 
(2)  whether  it  operates  like  an  indorsement  so  as  to  give  the 
transferee  the  rights  of  an  indorsee  against  prior  parties. 

Both  questions  turn  upon  the  same  ideas,  it  seems,  so  that 
the  answer  to  one  must  be  taken  as  the  answer  to  the  other. 
<;onfiict  oTau^    Unfortunately  the  authorities  are  not  agreed.     The 


thority.  earlier  American  authorities  appear  to  have  treated 

'<Lft>>/-r****-v>j^jj  unrestricted  guaranty  made  by  the  holder  of  the  paper 
J^  «r  (usually  a  promissory  note),  and  written  upon.it  m  tr^isferring 

it,  asjpractically  an  indorsement  and  in  ^fp^  StaxdB  that  view 


1  Packard  v.  Richardson,  17  Mass.  122, 


Sect.  2.]  ASSURER'S  CONTRACT.  193 

still  prevails)^That,  of  course,  means  that  a  general  contract 
of  guaranty,  when  written  upon  a  negotiable  contract  of  the 
law  merchant,  is  to  be  taken  as  a  negotiable  contract  as  of  the 
law  merchant.  For  example:  The  defendant,  payee  of  a  ne- 
gotiable promissory  note,  writes  on  the  back  of  it,  '  I  guaranty 
the  payment  of  the  within  note,'  signing  the  same,  and  transfers 
the  note  to  another  who  indorses  it  to  the  plaintiff.  At  ma- 
turity the  plaintiff  presents  the  note  for  payment,  and  payment 
being  refused,  gives  notice  at  once  to  the  defendant,  as  if  he 
were  an  indorser.  The  writing  quoted  is  deemed  an  indorse- 
ment, and  the  defendant's  liability  is  duly  fixed.^ 

But  the  question  at  once  arises  why  should  a  contract  of  the/jM  fIfiMA 
common  law,  as  such  incapable  of  negotiability,  become  negoti- 
able by  being  written  upon  a  negotiable  instrument  ?  Better  view  of 
It  is  true  that  when  written  there  by  the  holder,  '^^  subject, 
and  followed  by  transfer,  the  holder  parts  with  his  title ;  but  it 
does  not  follow  that  he  parts  with  it  as  the  law  merchant  re- 
quires in  order  to  give  the  act  the  special  features  of  the  law 
merchant.  Indeed,  in  so  far  as  it  departs  in  substance  from  the 
requirements  of  the  law  merchant,  it  falls  short,  or  should  fall 
short,  of  acquiring  the  features  pertaining  to  an  act  done  in 
conformity  to  such  requirements.  The  law  merchant  knows 
nothing  of  guaranty,  except  in  so  far  as  indorsement  is  guar- 
anty;  it  requires  indorsement  to  transfer  full  legal  title  to 
paper  payable  or  indorsed  to  order,  and  what  indorsement  is, 
the  law  merchant  has  carefully  and  consistently  laid  down,  as 
we  have  seen.^ 

Pursuing  this  or  some  such  line  of  reasoning,  certain  later 

authorities  have  refused  to  follow  the  earlier  ones,  considering 

that  a  guaranty  is  still  a  guaranty  though  written  upon  a  ne- 

gotiable  instrument,  and  not  an  indorsement     For  example; 

"The  defendant  is  maker,  and  the  plaintiff  transferee,  of  a  prom- 

1  Partridge  v.  Davis,  20  Vt.  499.  So  Myrick  v.  Hasey,  27  Maine,  9  ; 
Leggett  V.  Raymond,  6  Hill,  639  ;  Manrow  v.  Durham,  3  Hill,  584.  But 
these  New  York  cases  were  never  satisfactory  at  home,  and  they  have  been 
overruled.  Spies  v.  Gilmore,  1  Comst.  321 ;  Hall  v.  Newcomb,  7  Hill,  41fl  ; 
Waterbury  v.  Sinclair,  26  Barb.  455. 

••2  Ante,  pp.  83,  92-94. 

13 


194  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XIV. 

issory  note  payable  to  A.  The  only  writing  upon  the  note  by 
A  is  in  the  words,  'I  hereby  guaranty'  the  within  note'j  but 
with  this  writing  upon  it  A  transfers  the  note  to  F  and  L  who 
indorse  it  to  the  plaintiff,  who  now  as  an  indorsee  sues  the 
maker.  The  plaintiff  is  not  entitled  to  recover,  the  writing 
quoted  being  a  guaranty,  and  not  an  indorsement  or  the  equiv- 
alent of  an  indorsement.^ 

Of  course,  the  result  of  such  a  ruling  is  more  than  technical. 
It  is  not  merely  a  ruling  that  the  transferee  cannot  sue  in  his 
own  name,  a  ruling  which  would  be  abrogated  by  statute  in 
many  States;  it  is  a  ruling  that  no  perfect  legal  title,  such  as 
the  law  merchant  recognizes,  has  been  transferred.  The  trans- 
feree has  acquired  no  more  than  an  equitable  title;  and  hence 
his  demand  may  be  defeated  by  the  existence  of  equities  or  de- 
fences which  would  be  available  by  the  defendant  in  a  suit  by 
the  payee,  regardless  of  the  rule  in  whose  name  he  should  sue. 

The  considerations  above  presented  against  allowing  the 
guaranty  to  draw  negotiability  from  the  principal  contract 
apply  in  principle,  however  general  the  language  of  the  guar- 
anty towards  the  holder.^  The  contract,  being  a  contract  of  tlid 
common  law,  is  incapable  of  negotiability  by  any  intention  of 
the  guarantor,  however  expressed,  so  long  as  his  contract  is  ex- 
pressed in  the  language  of  guaranty.  Authorities,  however, 
are  not  wanting  which  decline  to  take  this  view  where  the 
guaranty  is  by  a  third  person,  and  not  by  the  holder  of  the  in- 
strument; and,  while  not  readily  allowing  negotiability  to  a 
guaranty,  allowing  it  to  the  guaranty  if  the  language  of  fhe 
guaranty  does  not  restrain  it.'  It  is  probable,  however,  that  the 
courts  which  treat  such  a  guaranty  as  negotiable  would  not 
strain  the  law  further  by  allowing  negotiability  to  a  guaranty 
not  written  upon  the  note,  bill,  or  cheque.     And  it  is  certain 

1  Belcher  v.  Smith,   7  Gush.   482  ;  Tuttle  v.  Bartholomew,  12  Met.    45^ 
(overruling  Blakely  v.  Grant,  6  Mass.  386,  and  Upham  v.  Prince,  14  Mass.  14) 
See  Central  Trust  Co.  v.  National  Bank,  101  U.  S.  70;  ante,  p.  93. 

*  See  note  to  Dunham  j\_£attersfln».j.§-L>-K.-A.-252. 

'  The  guaranty  of  bonds  and  similar  instmmentXof  corporations  stands 
upon  a  footing  of  its  own.  Custom  or  statute  makes  the  guaranty  negotiable 
in  such  cases.     The  text  refers  only  to  priyate^'ritten  guaranties. 


Sect.  3.]  ASSURER'S   CONTRACT.  195 

that  there  could  be  no  such  thing  as  a  negotiable  guaranty  uf 
an  unnegotiable  instrument. 

In  regard  to  the  third  peculiarity  of  contracts  of  the  law  mer- 
chant, grace,  no  serious  question  can  be  raised.  The  guaranty 
itself  does  not  draw  grace  from  the  law  merchant,  Guaranty 
and  is  not  entitled  to  grace  under  any  other  law,  touching  grace, 
while  the  contract  assured,  may  or  may  not  be.  But  of  course 
there  can  be  no  breach  of  the  guaranty  until  there  is  a  breach 
of  the  principal  contract,  which  cannot  occur  until  the  last  day 
of  grace,  if  the  principal  contract  is  entitled  to  grace. 

One  question  more  remains :  Does  a  guaranty  draw  from  the 
negotiable    instrument    assured    the  properties   of    indorsement 
touching  presentment    and   notice  ?     Those  courts  Guaranty 
which  treat  the  guaranty  as  practically  an  indorse-  ggntnieift  and 
ment  for  the  purpose  of   negotiability  would  prob-  notice. 
ably  be  driven  to  the  conclusion  that  the  guarantor  would  have 
the  right  to  insist  upon  all  the  steps  which  an  indorser  could 
require.     Otherwise  the  contract  would  be  very  anomalous  ;  it 
would  be  indorsement  and  not  indorsement  at  the  same  time. 

Those  courts,  however,  which  decline  to  treat  a  guaranty  as 
the  equivalent  of  an  indorsement  will  find  no  difficulty  now  ; 
the  guaranty  not  being  indorsement,  the  steps  to  fix  the  liabil- 
ity of  an  indorser  cannot  be  required  to  fix  the  liability  of  a 
guarantor.  The  guaranty  stands  upon  its  own  footing  as  a 
common  law  contract;  what  is  required  touching  it  in  that 
aspect  is  now  required,  and  nothing  more. 

What  has  been  said  thus  far  must  be  understood  as  applicable 
to  cases  already  referred  to  of  anomalous  indorsement  —  '  in- 
dorsement '  by  a  stranger  to  secure  the  payee  —  whether  such 
cases  are  called  cases  of  guaranty  or  of  suretyship. 

§  3.     Suretyship  (in  specific  sense). 

We  are  now  brought  to  suretyship  in  the  specific  sense  men- 
tioned in  section  1,  namely,  where  the  assurance  is  part  and 
parcel  of  the  contract  assured.  And  that  subject  may  be  more 
shortly  disposed  of. 


196  BILLS,  NOTES,   AND   CHEQUES.  [Chap.  XIV 

The  two  engagements  now  are  one,  as  where  the  instrument 
runs,  in  common  form,  '  I,  A  B,  as  principal,  and  I,  C  D,  as 
Surety's  en-  surety,  promise,'  etc.,  or  '  We  promise  to  pay,'  etc., 
gagementone     followed  by  the   signatures  'AB,'  'C  D,  surety.' 

with  prin-  ''  °  ,  ,  _       '  *' 

cipal's.  And  accordingly  the  consideration  which   supports 

the  engagement  of  the  principal  supports  that  of  the  surety  ; 
there  can  be  no  occasion  for  any  separate  consideration  to  support 
the  latter's  contract.  But  the  contract  being  within  the  Statute 
of  Frauds,  the  same  doctrine  in  regard  to  reference  to  considera- 
tion prevails  as  in  the  case  of  guaranty.  Now,  however,  the 
contract  of  principal  and  surety  being  one,  the  only  requirement 
that  can  be  made,  in  the  nature  of  things,  in  those  States  in 
which  there  must  be  a  reference  to  consideration,  is  in  the  one 
contract  signed  by  both  principal  and  surety.  It  should  be 
noticed  in  regard  to  that  point  that  the  contract,  in  such  States, 
may  be  good  against  the  principal  and,  for  want  of  reference  to 
consideration,  bad  against  the  surety  ;  indeed  it  would  be  bad 
against  both  if  the  contract  is  joint. 

No  question  of  course  can  arise  in  regard  to  negotiability. 
The  surety's  contract  being  one  with  the  principal's  contract, 
it  is  of  necessity  as  much  a  contract  of  the  law  merchant  as  the 
principal's  contract  itself.  And  the  same  is  to  be  said  in  regard 
to    grace,  and   in   regard   to   presentment    and   to   most   other 

questions. 

§  4.     Mortgage. 

The  executed  contract  of  mortgage,  assuring  an  instrument  of 

the  law  merchant,  stands  upon  a  footing  of  its  own.     It  is  an 

^  „        ^  incident  of  the  instrument  assured:  and  if  that  is 

Follows  the  .  ,  '_ 

instrument  negotiable  and  is  transferred  according  to  the  law 
merchant,  the  mortgage  passes  with  it,  ipso  facto, 
without  assignment  in  words,  and,  by  the  weight  of  authority, 
with  the  properties  of  the  principal  instrument  itself.^  Equities 
therefore  cut  off  by  negotiation  of  the  latter  to  a  holder  in  due 
course  are  cut  off  as  well  in  respect  of  the  mortgage.^ 

1  Carpenter  v.  Longman,  16  Wall.  271  ;  Kenicot  v.  "Wayne,  id.  452  ;  Trust 
Co.  V.  Smythe,  94  Tenn.  51-3  (citing  cases  contra)  ;  Clark  v.  Jones,  93  Tenn. 
639  ;  Mayes  i;.  Robinson,  93  Mo.  114  ;  First  National  Bank  v.  Rolirer,  138 
Mo.  369;  Crawford  v.  Aultman,  139  Mo.  262,  270;  Wilson  v.  Campbell,  110 
Mich.  580 ;  Robinson  Seminary  v.  Campbell,  60  Kans.  60. 


Sect.  1.]  HOLDER'S  POSITION.  li^7 


CHAPTER  XV. 

HOLDER'S  POSITION. 

§  1.     Change  of  Point  of  View  :  Strength  op 
Plaintiff's  Position. 

Thus  far  we  have  been  considering  the  several  particular 
contracts  of  the  parties  liable  upon  the  instrument,  in  other 
words  the  strength  of  the  defendant's  position;  Nature  of 
now  we  are  to  consider  the  opposite  side,  in  other  subject. 
words  the  strength  of  the  plaintiff's  position,  a  matter  which 
in  general  affects  alike  all  the  particular  contracts  heretofore 
under  consideration.  The  subject  will  relate  mainly  to  mediate 
(more  commonly  called  remote)  as  distinguished  from  immedi- 
ate parties ;  that  is,  mainly  to  cases  in  which  the  holder  is 
separated  b}'  at  least  one  link  from  the  defendant,  the  plaintiff 
being  usually  (but  not  necessarily)  ^  either  an  indorsee,  or  the 
payee  of  a  bill  of  exchange.  The  plaintiff's  right  of  action  is 
either  presumptive  or  paramount ;  between  any  immediate  parties 
it  is  presumptive,  consideration^  and  right  of  action  both  being 
presumptive ;  between  remote  parties  it  may  be  paramount. 
This  assumes  that  the  plaintiff's  title  is  regular  on  the  face  of 
the  instrument. 

^  The  payee  of  a  promissory  note  may  legally  be  in  the  same  position ;  that  is, 
he  may  be  a  holder  in  due  course,  taking  (for  instance  by  discount)  for  value 
and  without  notice.  Lookout  Bank  v.  Aull,  93  Tenn.  645  ;  Jordan  v.  Jordan, 
10  Lea,  129,  134  ;  Passumpsic  Bank  v.  Goss,  31  Vt.  315  ;  Willet  v.  Parker, 
2  Met.  608  ;  Deardorff  v.  Forseman,  24  Ind.  481.  So  of  a  bill  of  exchange 
drawn  to  the  drawer's  own  order,  and  sued  upon  by  him.  Merritt  v.  Duncan, 
7  Heisk.  156 ;  Lookout  Bank  v.  Aull,  supra. 

2  N.  I.  L.  §  31  :  '  Every  negotiable  instrument  is  deemed  prima  facie  to 
have  been  issued  for  a  valuable  consideration  ;  and  every  person  whose  signa- 
ture appears  thereon  to  have  bacome  a  party  thereto  for  value.'  The  same  is 
true  of  non-negotiable  paper. 


198  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XV. 

§  2.     Right  to  Sue  Mediate  or  Remote  Party, 

The  first  thing  that  calls  for  remark  is  that  the  right  of  the 
holder  to  sue  remote  parties  is  a  right  given  by  the  law  mer- 
Presumptis'e  chaut  iu  its  adoption  of  the  custom  of  merchants, 
strenth'''''^^'^'  That  right  is  as  perfect,  when  the  plaintiff  holds 
thereof.  the  paper  conformably  to  the  custom,  as  the  right 

to  sue  an  immediate  party  can  be.  And  further,  as  a  mere 
right  to  sue,  that  is,  leaving  out  of  sight  any  other  question, 
the  right  rests  upon  the  same  footing  substantially  as  the 
right  of  any  other  plaintiff  suing  upon  a  written  contract  of  the 
common  lawx4)ossessioux)f  ili£  instrun^i^  according  to  the  law 
merchant  races',  in^avor  of* the  pl^utiS^a  presumptive  right  to 
it,  and  after  maturity  a  presumptive  right  of  action  upon  it,  a 
right  of  action  against  remote  as    well  as  against    immediate 

parties.^  felSuA;.--**,^^^^^:; 

How  significant  that  Vigttt  may  be,  may  be  seen  in  the  state- 
ment that  it  will  support  the  plaintiff  in  the  face  (1)  of  an 
admission  that  he  holds  the  paper  only  as  agent  or  as  trustee  for 
another,  for  still  the  law  presumes  that  he  holds  it  rightfully 
until  the  contrary  is  shown;  (2)  of  evidence  offered  even  to 
show  that  it  is  not  imjjvobable  that  he  holds  it  as  agent  for 
another  against  whom  the  defendant  has  a  set-off  or  a  defence. 
Something  more  is  necessary  than  evidence  showing  that  it  is 
very  likely  that  the  plaintiff  has  no  right  to  the  paper,  or  right 
of  action  upon  it,  after  he  has  produced  it  in  evidence  in  court 
with  the  presumption  of  title  in  his  favor  and,  with  that,   the 

1  N.  L  L.  §  66  ;  Pettee  v.  Prout,  3  Gray,  502 ;  Cases,  225 ;  Williams  v. 
Holt,  170  Mass.  351;  First  National  Bank  v.  Green,  43  N.  Y.  298  ;  Grant  v. 
Walsh,  145  N.  Y.  502,  507;  Limerick  Rank  v.  Adams,  70  Vt.  132;  Mum- 
ford  V.  Weaver,  18  R.  L  801;  Sprekels  i;.  Bender,  30  Oreg.  577;  Middleton  v. 
Griffith,  57  N.  J.  442  ;  Newmarket  Bank  y.  Hanson,  67  N.  H.  501;  New  Eng- 
land Loan  Co.  v.  Robinson,  56  Neb.  50  ;  First  National  Bank  v.  McKibben, 
50  Neb.  513  ;  Crosby  v.  Ritchey,  47  Neb.  924  ;  s.  c.  56  Neb.  336  ;  Robinson 
V.  Smith,  62  Minn.  62  ;  Duerson  v.  Alsop,  27  Gratt.  229,  248  ;  Bedell  v. 
Herring,  11  Am.  St.  Rep.  320. 

Where  two  or  more  parts  of  a  bill  of  exchange  drawn  in  a  set  are  negotiated 
to  different  holders  in  due  course,  the  holder  whose  title  first  accrues  is,  as 
between  such  holders,  the  true  owner  of  the  bill.     N.  L  L.  §  186. 


SiiCT.  2.]  HOLDER'S  POSITION.  199 

presumption  of  consideration.  For  example:  The  plaintiff  in  a 
suit  upon  a  promissory  note  payable  to  a  certain  corporation  or 
bearer  offers  the  note  in  evidence  of  his  title  and  right  to  re- 
cover. The  defendant  denies  that  the  plaintiff  is  the  'bearer' 
and  owner  of  the  note,  alleging  that  it  is  the  property  of  said 
corporation,  against  which  the  defendant  has,  and  desirfes  to 
plead,  a  valid  set-off.  The  facts  are  that  the  plaintiff  is  the 
general  agent  of  said  corporation,  having  custody  of  all  notes 
belonging  to  it;  the  corporation  is  insolvent  and  has  no  prop- 
erty ;  and  the  stockholders,  of  whom  the  plaintiff  is  one,  are 
liable  for  its  debts.  The  plaintiff  is  entitled  to  recover,  and 
the  defendant  cannot  have  the  benefit  of  the  set-off;  the  evi- 
dence is  not  sufficient  to  rebut  the  presumption  of  right  in  favor 
of  the  plaintiff.^ 

It  matters  not  indeed"hat  the  instrument  bears  a  special 
indorsement  by  the  holder  at  the  time  of  the  suit;  still  the 
holder  is  presumptively  owner  and  entitled  to  sue  as  if  there 
■were  no  such  indorsement.^  The  indorsement  has  no  validity 
until  delivery  of  the  instrument,  and  meantime  the  holder  has 
the  legal  right  to  strike  it  out.^  The  strength  of  the  hold- 
er's position  as  indorsee  is  seen  in  still  stronger  light  by  the 
settled  rule  that  proof  of  want  of  consideration  between  the 
original  parties  is  not  enough  to  affect  his  right  of  action. 
The  plaintiff  is  presumptively  a  holder  for  value,  before  ma- 
turity, and  without  notice  of  any  defence,  in  other  words  a 
holder  in  due  course;  want  of  consideration  between  the  oriar- 
inal  parties  touches  no  part  of  the  presumption.*  Indeed,  the 
plaintiff  is  presumptively  entitled  to  recover  though  he  took  the 
instrument  after  maturity.^ 

1  Pettee  v.  Prout,  3  Gray,  502;  Cases,  225. 

a  Middleton  v.  Griffith,  57  N.  J.  442 ;  Sprekels  v.  Bender,  30  Greg.  577. 

*  Same  cases  ;  Dugan  v.  United  States,  3  Wheat.  172  ;  Pilmer  v.  State  Bank, 
19  Iowa,  112. 

*  Crosby  v.  Ritchey,  47  Neb.  924;  s.  c.  56  Neb.  336.    Further  on  a  sub- 
sequent page. 

*  Robinson  v.  Smith,  62  Minn.  62. 


200  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XV 

§  3.     Absolute  Defences  and  Equities. 

Assuming  now  that  no  question  of  title  to  or  ownership  of  th» 
paper  is  raised,  the  plaintiff's  right  to  recover  will  depend  upon 
Explanation  of  ^^6  defence  set  up,  which  may  be  either  absolutely 
terms.  ^j.   presumptively  sufiBcieut.     There  are  then  two 

classes  of  defences;  the  first  of  which  may  be  called  Absolute 
Defences;  the  second  are  called  Equities  —  shortly  for  Equities- 
fixed-upon-the-holder. 

These  terms,  however,  must  not  be  taken  in  their  ordinary 
sense;  in  that  sense  they  would  be  misleading.  Equities  are 
legal  defences  in  the  ordinary  sense  of  defences  available  in 
suits  at  law,  quite  as  much  as  are  absolute  ones.  The  term 
equities  applies  to  a  class  of  defences  most  of  which  originally 
were  not  available  as  defences  to  suits  at  law  on  contract,  being 
of  the  nature  of  cross-rights  of  action.  The  defences  at  law  were 
few,  being  simply  defensive  in  nature,  such  as  payment,  want 
of  consideration,  the  Statute  of  Limitations,  usury,  and  the  like. 
The  familiar  modern  defence  of  misrepresentation,  for  instance, 
was  not  considered  a  defence ;  it  admitted  a  contract,  and  did  not 
show  any  discharge;  accordingly  it  was  a  cross-right,  to  be  sued 
upon  by  the  injured  party. 

Such  cross-rights  were,  however,  available  in  chancery,  where 
they  were  treated  as  equities.  Finally,  in  the  18th  century, 
the  common  law  courts  came  to  admit  them,  under  the  name  of 
recoupment,  by  way  of  preventing  circuity  of  action;^  and  the 
law  merchant  adopted  them  under  their  proper  name  of  equities, 
and  then  extended  the  use  of  the  term  to  other  cases.  Accord- 
ingly it  will  be  taken  here  for  convenience  to  embrace  all  de- 
fences not  absolute. 

An  equity  may  be  a  perfect  and  complete  defence  between 
immediate  parties  to  it,  as  where  it  consists  in  fraudulent  mis- 
representation;  but  at  most  it  is  only  a  presumptive  defence 
against  a  mediate  or  remote  holder;  if  the  holder  took  the  paper 
for  value  and  without  notice,  or  (speaking  generally)  stands  upon 
the  rights  of  another  who  so  took,  the  '  equity '  will  not  avail-. 
The  plaintiff's  right  of  action  as  a  holder  in  due  course  is  accord- 

1  Harrington  v.  Stratton,  22  Pick.  510. 


Sect.  3.]  HOLDER'S  POSITION.  201 

ingly  paramount,   and   not  merely  presumptive,   in  a   case   of 
equities. 

The  meaning  given  to  the  two  terms,  respectively,  may  then 
be  thus  explained :  Absolute  defences  import  either  want  of  con- 
tract, want  of  capacity,  downright  illegality  of  contract  (that  is, 
a  contract  which  the  law  wholly  repudiates),  alteration  of  the 
original  contract,  or  forgery  of  indorsement.  The  Statute  of 
Limitations  belongs  to  the  same  category.  No  action  can  be 
maintained  against  a  party  having  such  a  defence,  not  even  by  a 
holder  in  due  course.  Equities,  on  the  other  hand,  imply  the 
existence  of  a  contract  between  prior  parties,  but  a  contract 
which  is  invalid  and  hence  defeasible  in  whole  or  in  part. 
Between  the  parties  immediately  concerned,  and  against  subse- 
quent holders  without  value  or  having  notice,  these  equities  are 
perfect  defences;  but  against  a  holder  in  due  course  they  are  of 
no  avail. ^ 

The  two  subjects  must  now  be  considered  in  detail.  First, 
then,  of  Absolute  Defences.  That  subject  is  considered  here 
because  it  almost  always  appears  in  contests  in  regard  to  the 
rights  of  bona  fide  holders  for  value.  The  question  then  will 
be,  what  are  these  defences  against  which  not  even  a  bona  fide 
holder  for  value  can  recover  ? 

To  prevent  possible  misapprehension,  it  should  be  stated  that 
in  strictness  of  language  these  are  not  defences  at  all;  for  it  is 
incumbent  upon  the  plaintiff  to  prove  the  existence  of  the  con- 
tract upon  which  he  seeks  to  recover.  The  term  'defences,'  iu 
the  cases  about  to  be  considered,  is  to  be  taken  conventionally; 
and  such  use  of  the  term  is  common  enough.  Thus,  the  books 
speak  of  the  *  defence  '  of  want  of  consideration  in  actions  upoa 
simple  contract,  though,  apart  from  anj-^  statute,  it  is  for  the 
plaintiff  to  prove  the  consideration.  But  there  is  better  justifi- 
cation for  the  use  of  the  term  in  relation  to  the  present  subject, 
because  after  all  the  defendant  has  the  laboring  oar  for  tliti 
greater  part.  The  plaintiff,  who  now  is  usually  a  bona  fide 
holder  for  value,  makes  a  j)res7imptive  case  easil}',  as  we  have 
seen,  and  then  the  defendant  must  do  what  he  can  to  sav« 
himself. 

1  Cristy  v.  Campau,  107  Mich.  172. 


202  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVL 


CHAPTER  XVI. 
ABSOLUTE   DEFENCES. 

§  IAp Delivery  :    Estoppel. 

We  have  elsewhere  seen  that  the  defendant's  signature  to  the 
instrument  does  not  of  itself  make  him  liable  ;  he  must  have 
T.  ,.  delivered  the  instrument.     We  have  also  seen  that 

Delivery  es- 
sential to  he  may  have  done  that  by  intention,  by  agency,  or 

toppel  to  deny    by  negligence,  and  in  no  other  way.^     But  we  have 

delivery.  ^^so  seen  that  the   defendant  may  have    estopped 

himself  to  deny  that  he  has  delivered  the  instrument.^     This  he 

may  have  done  by  words  or  acts  ;  but  only  in  favor  of  a  holder 

in   due   course.     This  then  is   the   place  for   considering  that 

subject. 

The  most  obvious  case  of  an  estoppel  upon  the  defendant  to 
deny  delivery  by  himself  would  be  where  by  statements  made  to 
How  estoppel  the  plaintiff  or  to  some  prior  holder  of  the  instru- 
anses.  ment,   ignorant  of  the  facts,  he  had  induced  such 

person  to  purchase  the  paper  as  valid  against  himself.  It  would 
not  be  necessary  for  him  to  state,  or  in  any  way  represent,  that 
he  had  delivered  the  instrument  ;  enough  that  he  has  repre- 
sented that  he  is  liable  upon  it,  for  that  imports  that  he  has 
delivered  it.  And  if  the  representation  be  without  qualification, 
the  effect  will  be  that  the  defendant  will  be  estopped  to  say  that 
the  delivery  was  conditional,  except  as  his  contract  itself  may 
have  been  conditional. 

But  conduct  as  well  as  statements  may  have  the  same  effect. 

Possibly  delivery  by  negligence,  or  by  agency  in  violation  of 

VT    V  instructions,    may  be   considered   examples   of  es- 

Negligence.  i      i  i      i  •  •  . 

toppel ;  but  the  better  view,  it  seems,  is  to  treat 

Buch  cases  as  cases  of  true  delivery  and  not  as  cases  of  estoppel, 
1  Ante,  pp.  13-15.  '■'  Ante,  p.  15. 


SiuT.  1.]  ABSOLUTE   DEFENCES.  203 

which   imports  that,  as  a  mere  matter  of  fact,  there  may  have 
been  no  delivery. 

No  estopjiel  of  the  kind  however,  whether  from  words  or  acts, 

can  arise  except  in  favor  of  a  holder  in  due  course,  that  is,  a 

bona  fide  holder  for  value,  and  without  notice  of  ..  ... 

'  Holdmg  in 

the  facts  ;  unless  the  estoppel  amounts  to  an  under-  due  course 
taking  like  a  warranty,  not  to  contest  liability  at  ■^®*^®*^*''> • 
all  towards  any  one.^     But  whether  the  defendant  knew  the  real 
state  of  things  would  no  doubt  be  immaterial,  if  the  representa- 
tion was  made  to  a  holder  in  due  course.     The  defendant  would 
doubtless  be  bound  to  know  the  facts.-^ 

It  will  not  be  enough  to  create  an  estoppel  that  the  defendant 
has  done  or  omitted  something  which  has  enabled  another  to 
put  the  instrument  into  circulation,  as  might  be  the  Making  theft 
case  from  merely  executing  and  signing  the  instru-  ^^^^' 
ment,  or  writing  an  indorsement  upon  it.  Thus  it  is  laid 
down  that  where  a  negotiable  instrument  is  stolen  or  fraudu- 
lently taken  from  the  acceptor  or  maker,  such  party  cannot  be 
required  to  pay  it  to  any  holder  whatever;  and  that  too  though 
the  acceptor  or  maker  may  have  made  the  theft  or  fraud  easy  by 
putting  the  paper  in  an  unlocked  drawer  in  a  desk  to  which 
clerks  and  servants  and  others  had  access.^  For  example  :  The 
plaintiff  is  bona  fide  holder  for  value  of  a  promissory  note  signed 
by  the  defendant,  and  now  sued  upon.  A  third  person  fraudu- 
lently obtains  it  from  the  defendant  upon  the  false  representation 
that  he  is  taking  something  else,  and  puts  it  into  circulation. 
The  defendant  is  not  liable;  there  has  been  no  delivery  by  him 
or  by  any  act  attributable  to  him,  nor  is  the  defendant  estopped 
to  say  so.* 

The  doctrine  of  estoppel  should  never,  it  is  well  laid  down,  be 

*  As  to  ignorance  of  the  facts  by  the  person  to  whom  the  representation  is 
made  see  Bigelow,  Estoppel,  626-628,  5th  ed. 

9  See  id.  609-626. 

«  Baxendale  v.  Bennett,  3  Q.  B.  Div.  525. 

*  See  Burson  v.  Huntington,  21  Mich.  415  ;  Cases,  227  ;  Gibbs  v.  Lina- 
bury,  22  Mich.  479  ;  Chapman  v.  Rose,  56  N.  Y.  137 ;  Kellogg  v.  Steiner,  29 
Wis.  626  ;  Corby  v.  Weddle,  57  Mo.  452  ;  1  Bigelow,  Fraud,  618,  619.  But 
eee  N.  I.  L.  §  23,  where  a  doubt  has  been  created. 


204  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVE 

invoked  without  necessity.  It  should  be  applied  only  in  cases 
where  the  person  against  whom  it  is  set  up  has  so  conducted 
himself,  in  what  he  has  done  or  omitted,  that,  unless  estopped, 
he  would  be  doing  something  contrary  to  his  former  conduct,  in 
what  he  then  did  or  omitted.  That  principle  does  not  apply  to 
a  case  of  theft  or  the  like,  even  though  the  party  stolen  from  was 
negligent;  for  theft  is  not  the  natural  consequence  of  negligence, 
though  the  negligence  make  it  possible  ;  ^  unless  perhaps  the 
theft  were  by  one's  servant  whom  one  knew  or  had  reason  to 
suppose  dishonest.^  Nor  in  any  case  of  negligence,  even  without 
theft  or  other  criminal  or  fraudulent  act,  does  estoppel  apply 
unless  the  negligence  was  in  or  in  immediate  connection  with 
putting  the  paper  into  circulation ;  ^  the  negligence  must  have 
been  the  cause,  the  proximate,  legal  cause,  of  what  happened.* 
For  example  :  The  defendant  executes  a  promissory  note  payable 
to  the  order  of  A,  and  leaves  the  same  on  his  table  before  A  and 
B,  while  he  (the  defendant)  goes  out  of  an  errand,  saj'ing  to  A 
that  he  must  not  take  the  note.  In  violation  of  this  prohibition 
A  takes  the  note,  carries  it  off,  and  indorses  it  to  the  plaintiff 
for  value  and  without  notice.  The  defendant  is  not  liable  ;  he 
is  not  estopped  to  denj^  delivery  of  the  note.^ 

The  statement  then  sometimes  found  even  in  books  of  the  law 
merchant,  that  whenever  one  of  two  innocent  persons  must 
,  „       ,  suffer  by   the   act  of  a  third  person,  he  who  has 

innocent  per-     enabled  such  third  person  to  bring  about  the  loss 
must   bear  the    loss,   is  too   broad,®  as    will    more 
fully  be  seen    further  on.     The  statement  indeed,    like  many 
another  started  when    judges   were  feeling   after  the  law,    '  if 

1  Baxendale  v.  Bennett,  supra,  Bramwell,  L.  J. 

*  Even  then  there  would  be  no  liability  where  the  dishonest  servant  forged 
his  employer's  signature,  though  the  employer  might  by  due  care  have  known 
that  he  was  dishonest.  Shepard  Lumber  Co.  r.  Eldridge,  171  Mass.  516. 
See  post,  p.  220. 

8  See  Arnold  v.  Cheque  Bank,  1  C.  P-  D.  578,  and  other  cases  ante, 
p.  15. 

*  See  Bank  of  England  v.  Vagliano,  1891,  A.  C.  107,  135,  and  other  cases 
ante,  p.  15. 

*  Burson  v.  Huntington,  supra.     But  qu.  if  defendant  was  negligent  ?, 

*  See  Arnold  v.  Cheque  Bank,  supra. 


Sect.  2.]  ABSOLUTE  DEFENCES.  205 

haply  they  might  find  it,'  is  a  dangerous  one,  so  much  so  that 
the  danger  fairly  overbalances  its  usefulness. 

§  2.     Want  of  Contract  :  Fraud  in  Esse  Contractus. 

Fraud   in   esse  contractus,  as   we  use  the   term,  is  fraud  by 
which  legal  agreement  itself  in  the  supposed  contract  was  pre- 
vented.^    The  case  is   to  be  distinguished  sharply  ki  d    f 
from  fraud  in  its    more  common   form   of  misrep-  fraud  distin- 
resentation  of   facts    touching   the  inducement   or  ^"'^ 
desirability  of  the  contract,  or  the  fraud  of  an  agent  in  wrong- 
fully filling  up  and  delivering  a  blank  instrument  signed  by 
his  principal.     That  sort  of  fraud  does    not  prevent  contract; 
it  only  makes  a  case  in   which  it  is  or  may  be  probable  that 
there  would  have  been  no  such  contract  as  took  place,   had  the 
state  of  things  been  known  by  the  defendant,  or  had  the  instru- 
ment  been   under  his  control  at  the  moment.      Fraud  of  that 
kind  creates  an  equity  only,   not  an  absolute  defence. 

Fraud  in  esse  contractus  may  be  committed  in  any  of  the 
various  contracts  with  which  we  are  concerned,  and  in  a  vari- 
ety of   ways:  enough    that    assent   to  the  particu-  ,,. 

•^  -^     '  °  ^  '■  Misrepresenta- 

lar  alleged  contract  was  never  given.  One  of  the  tion  of  nature 
forms  which  fraud  of  the  kind  assumes  is  mis- 
representation (not  of  facts  of  inducement,  but)  of  the  very 
kind  of  contract  which  the  party  is  induced  to  sign,  or  by  the 
substitution,  unperceived  or  misunderstood  by  such  party,  of 
the  paper  he  intended  to  sign  for  another  which  he  did  not  in- 
tend to  sign.  For  example:  The  plaintiff  is  bona  fide  holder 
for  value  of  a  bill  of  exchange,  upon  which  there  is  an  indorse- 
ment in  the  handwriting  of  the  defendant,  upon  which  indorse- 
ment the  suit  is  brought.  The  defendant,  a  man  advanced  in 
years,  is  induced  to  write  his  name  upon  the  back  of  the  bill  by 
the  fraud  of  the  acceptor  in  telling  the  defendant  that  the  con- 
tract he  is  signing  is  a  guaranty  ;  only  the  back  of  the  paper 
being  shown.  The  defendant  had  previously  signed  a  guaranty 
at  the  request  of  the  same  person,  for  the  same  purpose  and 

1  See  Willard  v.  Nelson,  35  Neb.  651 ;  s.  c.  37  Am.  St.  Rep.  455  and 
note. 


206  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVL 

amount,  and  he  is  now  led  to  suppose  that  he  is  signing  a 
similar  guaranty  to  the  former  one  (out  of  which  no  liability 
resulted).  There  has  been  no  negligence  by  the  defendant. 
The  plaintiff  is  not  entitled  to  recover,  the  defendant  having 
been  deceived,  not  in  respect  of  the  legal  effect,  but  of  the 
actual  contents  of  the  instruments.^ 

That  shows  again  that  the  statement  that  whenever  one  of 

two  innocent  persons  must  suffer  by  the  act  of  a  third  person,  he 

who  has  enabled  such  third  person  to  bring  about 

'  One  of  two  '^  "^ 

innocent  per-  the  loss  must  bear  the  loss,  can  only  be  accepted 
^°°^'  with  important  qualifications.'^     The  proposition  is 

too  broad  even  in  cases  of  negligence,  as  was  seen  in  speaking 
of  delivery;  and  in  the  example  last  given  there  was  not  even 
negligence.  The  burden  of  the  loss  cannot  be  shifted  over  to 
the  shoulders  of  one  who  never  contracted,  though  his  act  or 
conduct  may  have  been  the  occasion,  assuming  that  it  was  not 
the  cause,  of  the  loss. 

^U^  ^..uL>*  a^^.  2-^ar^ 

§  3.     Want  of  Contract  :  Alteration  :  Forgery  of 
Signature  :  Estoppel. 

Another  case  of  want  of  contract  arises  where  there  has  been 
a  material,  unauthorized  alteration  of  the  instrument  to  which 
the  defendant  gave  his  signature.  The  authorities  on  the  un- 
written law  in  general  declare  that  to  alter  materially  the 
terms,  written  or  printed,  of  a  negotiable  note,  bill,  or  cheque, 
after  the  defendant's  signature  was  written  to  it,  is  to  destroy 
its  validity  against  him,  even  in  the  hands  of  a  holder  in  due 
course,  so  that  no  action  can  be  maintained  upon  it  even  in  its 
original  form.     The  reason  is   plain.     The  altered  instrument 

1  Foster  r.  Mackinnon,  L.  R.  4  C.  P.  704  ;  Cases,  237.  Compare  certain' 
statutory  cases  of  tricks  or  devices  by  which  men  have  been  induced  by  trav- 
elling  agents  for  patent-rights  and  other  things  to  sign  promissory  notes.' 
Champion  v.  Ulmer,  70  111.  320.     See  Gibbs  v.  Linabury,  22  Mich.  479.  ; 

2  If  that  statement  were  true,  a  man  might  be  held  as  maker  of  a  promis-. 
sory  note  who  had  merely  written  his  name  upon  a  blank  sheet  of  paper  which 
another  had  afterwards  fraudulently  filled  out  as  a  promise  to  pay   money. 
Df  course  no  liability  towards  any  one  could  be  created  in  such  a  case.     Se« 
Cline  V.  Guthrie,  42  Ind.  227;  Caulkins  r.  Whisler,  29  Iowa,  495. 


Sect.  3.]  ABSOLUTE  DEFENCES.  207 

is  not  the  one  he   signed;  and  the  identity  of  the  one  signed 
has  been  destroyed.^ 

A  material  alteration  within  the  meaning  of  the  rule  stated 
may  be  defined  thus  :  Any  alteration  (1)  changing  the  legal  effect 
of  the  instrument,  (2)  made  with  such  intent  and  having  become 
final,  (3)  without  consent,  (4)  by  a  party  to  it,  or  by  one  in 
lawful  possession  or  custody  of  it,  is  a  material  alteration.  The. 
divisions  of  the  definition  as  here  given  will  serve  as  the  basis, 
of  an  analysis  of  the  subject. 

First,  then,  of  alterations  'changing  the  legal  effect  of  the 
instrument.'  It  was  at  one  time  considered,  and  it  is  still 
occasionally  intimated,  that  a  fraudulent  altera-  immaterial 
tion,  material  or  not,  would  destroy  the  instrument,  alteration, 
perhaps  as  a  sort  of  penalty  for  the  wrongful  intent;  "^  but  that 
doctrine  has  been  generally  abandoned.  An  immaterial  altera- 
tion then  cannot,  by  the  current  of  authority,  or  under  the 
Statute,^  have  the  effect  to  prevent  recovery  upon  the  paper. 
For  example :  The  plaintiff  is  holder  for  value,  and  the 
defendant  maker,  of  a  promissory  note  sued  upon,  which  does 
not  state  any  time  of  payment.     The  plaintiff  afterwards  writes 

1  Wade  0.  Witliington,  1  Allen,  561  ;  Draper  v.  Ward,  112  Mass.  315; 
Aldrieh  v.  Smith,  37  Mich.  468.  See  Woodworth  v.  Bank  of  America,  10 
Am.  Dec.  239  and  note  ;  Slater  v.  Moore,  86  Va.  26  ;  Bachelder  v.  White,  80 
Va.  103;  Citizens'  Bank  t>.  Williams,  174  Penn.  St.  66  ;  Gettysburg  Bank  v. 
Chisholm,  169  Penn.  St.  564  ;  Newman  v.  King,  54  Ohio  St.  273;  Cronkhite 
j;.  Nebeker,  81  Ind.  319;  Charlton  v.  Reed,  61  Iowa,  166.  To  alter  materi- 
ally a  memorandum  made  part  of  the  instrument,  on  the  same  pajier  or  a 
paper  annexed,  has  the  same  effect  as  the  alteration  of  the  instrument  itself, 
so  long  as  the  connection  between  the  two  is  preserved.  Meade  .  Saudidge,_ 
9  Texas  Civ.  Ap.  360 ;  Tuckerraan  v.  Harwell,  14  Am.  Dec.  232,  note.  See 
post,  p.  221. 

2  See  McDaniel  v.  Whitsett,  96  Tenn.  10,  as  quoted  infra,  p.  211,  note; 
Pigot's  Case,  11  Coke,  27  a,  comment  on  2d  resolution.  The  word  'fraudu- 
lent '  is  not  used  there  ;  but  in  its  a[>plication  to  immaterial  alterations,  the 
language  must,  it  seems,  be  understood  as  referring  to  a  fraudulent  intent. 
'If  the  obligee  himself,'  as  Coke  comments  in  the  passage  referred  to,  'alters 
the  deed  ,  .  .  although  it  is  in  words  not  material,  yet  the  deed  is  void.' 

*  N.  I.  L.  §  131  :  '  Where  a  negotiable  instrument  is  materially  altered 
...  it  is  avoided,'  etc. 


208  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVL 

in  the  words  '  on  demand,'  without  the  defendant's  consent  and 
with  fraudulent  intent.  The  plaintiff  is  entitled  to  recover  not- 
withstanding the  alteration,  the  note  being  originally  payable 
on  demand  in  legal  effect.^  Again  :  The  plaintiff  is  holder  for 
value  of  an  instrument  made  by  the  defendant,  promising  to 
pay  a  certain  sum  of  money,  upon  a  condition  expressed  therein, 
to  a  person  named.  The  payee  afterwards  writes  in  the  words 
'  or  bearer  '  without  the  defendant's  consent.  The  defendant's 
liability  remains  unchanged;  the  contract,  being  incapable  of 
negotiability  as  it  was  executed,  could  not  be  made  negotiable 
by  adding  the  words  in  question.* 

A  like  case  would  be  made  where,  after  a  change  of  law  not 
governing  the  instrument  in  question,  an  alteration  in  it  is 
made  expressing  no  more  than  what  was  embraced  in  the  law 
by  which  the  instrument  was  governed.'  Another  case  of  the 
kind  would  arise  where  an  alteration  was  made  conforming  to 
the  true  understanding  of  the  parties,  correcting  a  mistake  in 
the  writing.*  So  to  add  the  words  '  with  grace  '  to  paper  en- 
titled by  law  to  grace,  or  '  without  grace '  to  paper  not  entitled 
to  grace;  and  so  to  add  the  legal  rate  of  interest,  as  'at  six 
per  cent,'  after  the  words  'with  interest,' — such  additions  are 
immaterial;  they  have  no  effect  upon  the  validity  of  the  instru- 
ment. In  such  cases  it  makes  no  difference  whether  the  defend- 
ant has  consented  to  the  alteration  or  not;  and  so  of  all  other 
cases  in  which  the  alteration  is  immaterial. 

It  would  be  difficult  to  show  what  alterations  are  such  as  to 
change  the  legal  effect  of  the  instrument,  in  any  other  waj'  than 
by  specific  cases.  And  then  too  it  should  be  remembered  that 
we  are  dealing  with  but  part  of  the  definition,  and  that  all  the 
other  parts  of  it  must  also  be  met  to  make  a  material  alteration. 

1  Aldous  V.  Cornwell,  L.  R.  3  Q.  B.  573,  overruling  Pigot's  Case,  2d 
resolution.  See  Goodenow  v.  Curtis,  33  Mich.  505  ;  Curtis  v.  Goodenow,  24 
Mich.  18.     But  see  Bridges  v.  Winters,  42  Miss.  135. 

2  Goodenow  v.  Curtis  and  Curtis  v.  Goodenow,  supra, 
8  Bridges  v.  Winters,  42  Miss.  135. 

*  McRaven  v.  Crisler,  53  Miss.  542 ;  Clute  v.  Small,  17  Wend.  238 ; 
Harvey  v.  Harvej%  15  Maine,  357.  But  see  Miller  v.  Gilleland,  19  Penn.  St. 
119,  by  a  divided  court. 


Sect.  3.]  ABSOLUTE   DEFENCES.  209 

In  other  words,  though  in  a  particular  case  the  alteration  ap- 
pears to  change  the  legal  effect  of  the  instrument,  it  may 
appear  that  it  was  not  '  made  with  such  intent  and  having 
become  final,'  or  one  of  the  other  facts  may  be  wanting  to  make 
it  material. 

The  following  are  some  of  the  cases  in  which  the  alteration 
changes,  or  appears  to  change,  the  legal  effect  of  the  instru- 
ment: An  alteration  of  the  date  of  the  instrument;  ^  changing 
*I  promise  'to  'we  promise,'  for  such  change  would  convert  a 
several,  or  a  joint  and  several,  into  a  joint  promise;  '^  the  addi- 
tion of  an  interest  clause  to  an  instrument  completed  without 
it,^  as  for  example,  'to  bear  legal  interest,' ^  or  'interest  pay- 
able annually  '  or  'semi-annually,'  'quarterly'  or  otherwise;* 
striking  out  the  words  '  after  maturity  '  where  interest  is  made 
so  payable;  ®  changing  the  name  of  the  payee;  ^  changing  *  to  the 
order  of  A '  to  '  to  A  or  bearer,'  *  or  to  the  '  holder  ; ' '  changing 
the  place  of  payment,*^  as  by  adding  the  words  '  paj'able  at  the 
Bank  of  S,'  if  the  instrument  before  was  not  payable  there,^* 
though  it  seems  that  an  acceptor  may  make  a  bill  payable  at  no 
designated  place  payable  at  an}^  particular  place  he  will  within 

3  N.  I.  L.  §  132,  1 ;  Newman  v.  King,  54  Ohio  St.  273  ;  Vance  v.  Lowther, 
1  Ex.  D.  176;  "Wood  v.  Steele,  6  Wall.  80;  Britton  v.  Dierker,  46  Mo.  591  ; 
Emmons  v.  Meeker,  55  Ind.  321  ;  Kennedy  v.  Lancaster  Bank,  18  Penn. 
St.   347. 

2  Humphreys  v.  Gwillow,  13  N.  H.  385  ;  N.  L  L.  §  132,  4. 

s  Holmes  v.  Trumper,  22  Mich.  427  ;  Cases,  258  ;  Glover  v.  Robbins,  49 
Ala.  219  ;  N.  I.  L.  §  132,  2.  Perhaps  not  to  add  'with  intere.st  after  ma- 
turity,' where  nothing  is  said  about  interest  in  the  instrument.  As  to  filling 
blanks  in  such  cases,  see  infra. 

*  Lochnane  v.  Emmerson,  11  Bush,  69  ;  Gettesburg  Bank  v.  Chisholm, 
169  Penn.  St.  564. 

6  Marsh  v.  Griffin,  42  Iowa,  403  ;  Blakey  v.  Johnson,  13  Bush,  197  ; 
Lamar  v.  Brown,  56  Ala.  157. 

«  Brooks  V.  Allen,  62  Lid.  401. 

■»  Stoddard  v.  Penniman,  108  Mass.  366  ;  s.  c.  113  Mass.  386. 

»  Union  Bank  v.  Roberts,  45  Wis.  373  ;  N.  L  L.  §  132,  3. 

«  McDaniel  v.  Whitsett,  96  Tenn.  10. 

W  Pelton  V.  San  Jacinto  Lumber  Co.,  113  Cal.  21. 

«  South wark  Bank  v.  Gross,  35  Penn.  St.  80  ;  Nazro  v.  Fuller,  24  Wend. 

374  ;  Whitesides  v.  Northern  Bank,   10  Bush,   501  ;   BurchBeld   v.    Moore, 

3  El.  &  B.  683. 

14 


210  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVI 

the  town  in  which  by  law  it  is  payable;  ^  adding  another  name 
to  that  of  the  maker  of  a  note,^  though  the  case  appears  to  be 
different  where  another  surety  is  added,  upon  delivery,  to  a 
note  or  bill  already  executed  by  a  surety  ;  ^  adding  an  attesta- 
tion clause,  for  that  produces  a  possible  and  probable  change  in 
the  evidence  of  execution,  proof  of  the  signature  of  the  attest- 
ing witness  being  ordinarily  essential  to  prove  the  execution  ;  * 
changing  the  sum  payable  whether  principal  or  interest,*  or  the 
medium  or  currency  in  which  payment  is  to  be  made.® 

*  Made  with  such  intent  and  having  become  final.'  The  alter- 
ation may  have  been  fraudulent,  or  due  to  accident  or  mistake. 
Correcting  ^^  is  presumptively  fraudulent,  it  seems,  if  it  was 
mistake.  material.''  Presumptively  then  the  instrument  is 
destroyed  by  a  material  alteration,  and  destroyed  fraudulently. 
But  it  may  be  that  the  alteration  was  the  result  of  an  accident, 
as  where  the  intention  was  to  make  the  change  in  another  in- 
strument; or  it  may  be  due  to  mistake  in  regard  to  the  terms  of 
agreement,  or  in  computation  of  amount,  or  in  some  other  par- 
ticular. When  that  is  the  case,  the  instrument  is  not  neces- 
sarily destroyed.^     Thus  if  the  holder  has  by  mistake  struck 

1  Troy  Bank  v.  Lauman,  19  N.  Y.  477.  See  Todd  v.  Bank  of  Kentucky, 
3  Bush,  626  ;  Whitesides  v.  JTorthern  Bank,  supra  ;  of  the  right  of  an  accom- 
modation acceptor  of  a  bill  payable  generally  to  designate  a  particular  place 
of  payment. 

2  N.  L  L.  §  132,  4  ;  Hamilton  v.  Hooper,  46  Iowa,  515  ;  Lunt  v.  Silver, 
5  Mo.  App.  186  ;  Haskell  v.  Champion,  30  Mo.  136  ;  Crandall  v.  First  National 
Bank,  61  Ind.  349  ;  Wallace  v.  Jewell,  21  Ohio  St.  163  ;  Gardner  y.  Walsh, 
5  El.  &  B.  83. 

3  Crandall  v.  First  National  Bank,  supra  ;  Keith  v.  Goodwin,  31  Vt.  268, 
distinguishing  Gardner  v.  Walsh,  supra,  and  like  cases,  on  the  ground  that 
the  addition  was  made  after  the  instrument  had  been  delivered. 

*  Adams  v.  Frye,  3  Met.  103. 

6  N.  L  L.  §  132,  2.  6  la.  §  132,  5. 

"^  See  note  infra,  p.  211,  as  to  McDaniel  v.  Whitsett,  supra. 

8  N.  L  L.  §  130  ;  Wilkinson  v.  Johnson,  3  Barn.  &  C.  428  ;  s.  c,  27  Rev. 
Rep.  393  ;  Decker  v.  Franz,  7  Bush,  273;  McRaven  v.  Crisler,  53  Miss.  542  ; 
Harvey  v.  Harvey,  15  Maine,  357.  See  Johnson  v.  Johnson,  66  Mich.  525  ; 
Citizens'  Bank  v.  Williams,  174  Penn.  St.  66.  But  see  Newman  v.  King,  54 
Ohio  St.  273,  putting  the  contrary  on  grounds  of  public  policy.  The  suit  was 
by  an  indorsee  upon  a  promissory  note. 


Sect.  3.]  ABSOLUTE  DEFENCES.  211 

out  an  indorsement,  he  has  not  lost  his  right  against  the  in- 
dorser.^  Or  if  new  words  have  merely  been  added  to  the  in- 
strument by  mistake,  they  may  in  principle  be  struck  out  by 
the  one  who  added  them,  on  discovering  the  mistake ;  or  if  they 
are  written  over  an  erasure  of  the  original  words,  and  the  origi- 
nal words  cannot  well  be  restored,  they  may  stand,  and  the  ex- 
planation be  given  at  the  trial."  In  the  case  of  mistake  there  id 
then  a  locus  penitentiie  before  the  act  becomes  final. 

Tlie  right  to  make  such  correction  appears  however  tu  bo 
limited  to  the  person  who  made  the  change,  including  possibly 
his  agents  and  personal  representatives.  After  the  instrument 
has  passed  from  his  hands  it  is  too  late;  for  his  indorsee  wi.ll 
have  taken  it  as  altered,  and  the  only  right  he  can  have  is  upon 
the  altered  paper.  He  did  not  take  it  as  it  stood  originally, 
and  hence  cannot  restore  it  to  its  original  form  even  where  that 
would  be  physically  practicable.  The  alteration  has  been 
allowed  to  stand  by  the  party  who  made  it,  and  so  has  perma- 
nently changed  the  paper;  it  has  become  'final.'  Nor  would- it 
make  any  difference,  it  seems,  that  the  party  who  made  the 
alteration  did  not  discover  his  mistake  until  after  he  had  trans- 
ferred the  instrument  ;  after  transferring  it,  his  rights  over  it 
are  gone. 

The  difference  between  material  alterations  made  by  mis. 
take,  and  material  alterations  made  simply  with  intent  to 
change  the  legal  effect  of  the  instrument,  is  plain  ;  Mistake  dis-' 
in  the  case  of  mistake,  the  object  of  the  act  is  to  tingmshed. 
restore  the  writing  to  the  terms  agreed  upon  ;  in  the  case  of  in- 
tention simply  to  change,  the  object  virtually  is  to  destroy  the 
writing  as  evidence  of  the  terms  actually  agreed  upon.  One 
who  has  made  a  fraudulent  and  material  alteration  is  accord- 
ingly bound  at  once  by  his  act,  and  cannot  recall  it.^     And  he 

1  Wilkinson  v.  Johnson,  3  Barn.  &  C.  428  ;  .s.  c.  27  Rev.  Eep.  393. 

2  Compare  Hoist  v.  Wagner,  43  Iowa,  373  ;  Krause  v.  Meyer,  32  Iowa, 
566. 

3  McDaniel  v.  Whitsett,  96  Tenn.  10.  The  rule  as  to  alteration,  it  is  hero 
laid  down,  'imports  a  fraud  when  it  is  material,  whether  so  intended  or  not ; 
and  even  if  no  injury  is  done  and  the  change  abandoned  by  the  party  in  whose 
lavor  it  was  intended  to  operate,  the  consequence  is  the  same.'     The  rule  is 


212  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVI 

can  neither  sue  upon  the  instrument  nor  recover  the  considera- 
tion he  may  have  given  for  it,  or  the  debt  as  such  for  wliich  the 
instrument  was  given. 

The  distinction  stated  will  serve  to  explain  some  of  the  ap- 
parent contradictions  of  the  authorities.  Thus,  it  is  laid  down 
that  a  material  alteration  by  a  party  will  destroy  the  instrument 
whether  it  was  fraudulent  or  not ;  ^  and  it  is  also  laid  down  that 
a  material  alteration  will  not  destroy  the  instrument  if  it  was 
not  fraudulent.^  Both  statements  are  true.  The  case  usually 
presented  is  one  in  which  the  alteration  was  suffered  to  remain, 
and  the  paper  passed  as  altered  to  the  plaintiff.  The  alteration 
is  final,  and  authority  conforms  to  principle,  that  the  plaintiff, 
though  a  holder  in  due  course,  cannot  maintain  an  action  in 
such  a  case  against  an}'  of  the  non-consenting  parties  who 
signed  the  paper  as  it  stood  before  the  alteration.  For  exam- 
ple :  The  plaintiff  is  payee  for  value  of  what  purports  to  be  a 
promissory  note  signed  by  the  defendants.  The  instrument 
originally  read:  'For  value  received  /promise  to  pay,'  etc., 
'with  interest,'  and  so  was  signed  by  two  persons,  the  defend- 
ants. The  note  thus  executed  was  for  the  benefit  of  the  first 
signer,  who  afterwards  changes  the  word  '  I '  to  'we,'  and  adds 
Sifter  the  word  '  interest '  the  words  '  at  twelve  per  cent,'  without 
the  other  defendant's  knowledge,  supposing  himself  to  have  the 
right  to  do  so,  the  rate  of  interest  not  having  been  agreed  upon 
when  the  note  was  executed,  but  being  afterwards  fixed  between 
the  first  defendant  and  the  plaintiff  as  inserted.  Then  the 
instrument  so  altered  is  delivered  to  the  plaintiff.  The  plain- 
intended  to  operate  as  a  penalty  against  the  party  making  the  alteration  as 
well  as  a  protection  to  the  other  party.  Id.  Perhaps  the  language  quoted  is  ' 
rather  too  strong.  It  seems  sufficient  to  say,  as  has  been  said  in  the  text,  th;it 
a  material  alteration  is  presumptively  fraudulent. 

But  it  seems  clear  that  when  there  is,  in  fact,  a  fraudulent  intent,  or  any 
intent  to  destroy,  accompanying  the  alteration,  the  act  is  final  ;  for  after  A 
has  discharged  B  from  contract  he  cannot  revive  B's  liability  without  his  con- 
sent any  more  than  he  could  create  the  liability  without  his  consent.  Nor  is 
it  necessary  to  the  completion  of  the  act  that  B  should  have  notice  of  it.  An 
indorser  can  be  discharged  by  simply  striking  out  his  name. 

^  Draper  v.  Ward,  supra. 

*  Kountz  17.  Kennedy,  63  Penn.  St.  187. 


Fept.  3]  ABSOLUTE   DEFENCES.  21.". 

tiff  is  not  entitled  to  recover  against  the  second  defendant^ 
either  upon  the  instrument  in  its  altered  or  by  the  unwrit- 
ten law  in  its  original  form,  though  the  alteration  was  not 
fraudulent.^ 

Hence,  the  first  of  the  two  apparently  contradictory  proposi- 
tions is  true.  But  the  party  having  made  an  innocent  mistake, 
in  making  the  alteration,  may,  wliile  the  instrument  is  still  in 
his  own  hands,  discover  his  mistake  and  desire  to  correct  it, 
restoring  the  instrument  to  its  original  state.  The  alteration 
not  having  become  final,  that  may  be  done,  or  the  case  may  be 
treated  as  if  it  had  been  done,  or  as  if  no  alteration  had  been 
made,  if  actual  restoration  is  impracticable.  Hence,  the  second 
of  the  two  propositions  also  is  correct.  This  explanation  may 
not  indeed  align  with  some  of  the  authorities,  for  the  second 
proposition  has  misled  the  courts  in  some  cases,  causing  them 
to  hold  in  general  that  material  alterations  which  are  not  fraud- 
ulent are  not  fatal  to  the  instrument ;  but  the  explanation,  it  is 
believed,  shows  a  sound  distinction. 

The  general  rule  then  may  be  expanded  and  stated  thus: 
If  the  bill,  note,  or  cheque  be  altered  in  a  material  particu- 
lar, either  by  fraud  or  by  an  innocent  mistake  not  ^uie  expanded 
corrected  while  the  paper  is  in  the  hands  of  the  and  stated, 
party  who  made  the  alteration,  it  will  be,  by  the  unwritten  law 
merchant,  destroyed  towards  all  non-consenting  parties,  and 
that  too  whether  the  alteration  was  made  by  the  party  claiming 
under  it  or  by  any  other  party  to  it.  And  no  action  can  be 
maintained  against  non-consenting  parties,  either  upon  the 
altered  instrument  or  (by  the  unwritten  law)  upon  the  instru- 
ment as  it  stood  before  alteration,  even  by  a  bona  fide  holder 
for  value.^  The  fact  that  the  instrument  may  have  been  re- 
stored to  its  original  form  (after  having  been  passed  with  the 
alteration)  makes  no   difference.'     Nor  is  the  alteration  to  be 

1  Draper  v.  Ward,  supra. 

2  See  besides  the  cases  supra,  Smith  v.  Mace,  44  N.  H.  553  ;  Holmes  v. 
Trumper,  22  Mich.  427 ;  Cases,  258  ;  Greenfield  Bank  v.  Stowell,  123  Mass. 
196;  Citizens'  Bank  r.  Richmond,  121  Mass.  110;  Woolfolk  v.  Bank  ot 
America,  10  Bush,  504,  517;  Morehead  v.  Parkersburg  Bank,  5  W.  Va.  74: 
Burchfield  v.  Moore,  3  El.  &  B.  683. 

*  Citizens'  Bank  v.  Richmond,  supra. 


214  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XTL 

deemed  immaterial  by  reason  of  the  fact  that  it  is  against  the 
interest  of  the  one  making  it  and  favorable  to  the  other/  for  still 
its  legal  effect  is  changed,  and  the  identity  of  the  contract" 
signed  is  destroyed.'^  But  such  an  alteration  rebuts  any  pre- 
sumption of  fraud.' 

The  Statute  has  changed  the  unwritten  law  to  this  extent, 
that  a  holder  of  the  instrument  in  due  course,  not  a  party  to  the 
alteration,  may  enforce  payment  of  it  according  to  its  original 
tenor.* 

'Without  consent.'  Consenting  parties  cannot  set  up  an 
alteration;^  and,  among  others,  all  who  have  signed  the  con- 
.„  •  tract  after  the  alteration  are  in  effect  consenting 

Who  are  «       .  ■  ^  j 

deemed  to  con-  parties ; "  with  one  exception  to  be  stated  pres- 
^"^"  ■  ently.     Thus,  if  an  alteration  in  the  date  of  a  bill 

of  exchange  was  made  with  the  consent  of  the  acceptor,  or  if  he 
subsequently  assented  to  it,  he  will  be  bound,  and  so  will  'all 
other  parties  to  it  becoming  such  after  the  alteration;  while  the 
prior  non-consenting  parties  may  repudiate  the  instrument.'' 

1  Humphreys  v.  Gwillow,  13  N.  H.  385,  387. 

2  Id. ;  Draper  v.  "Ward,  1  Allen,  561  ;  Chism  v.  Toomer,  27  Ark.  108. 

8  Keene  v.  Aldrich,  19  R.  L  309,  311;  Whitmer  u.  Fry,  10  Mo.  349; 
Wheelock  v.  Freeman,  13  Pick.  165;  Robinson  v.  Reed,  46  Iowa,  219.  The 
result  is  that  the  party  who  made  the  alteration  may  sue  ou  the  debt  for 
which  he  received  the  instrument  against  those  who  received  the  considera- 
tion. Keene  v.  Aldrich,  supra  ;  Booth  v.  Powers,  56  N.  Y.  22,  31  ;  Mattesou 
r.. Ellsworth,  33  Wis.  488 ;  Hunt  i'.  Gray,  35  N.  J.  227,  234. 

*  N.  I.  L.  §  131.  So  in  Pennsylvania  regardless  of  statute,  if  the  altera- 
tion was  not  such  as  to  excite  suspicion.  Worrall  v.  Gheen,  39  Penn.  St. 
388  ;  Cases,  256  ;  Garrard  v.  Haddan,  67  Penn.  St.  82  ;  Phelan  v.  Moss,  id. 
59.  See  also  Brown  v.  Reed,  79  Penn.  St.  370  ;  Neffv.  Horner,  63  Penn.  St. 
327. 

6  Jacobs  V.  Gilreath,  45  S.  C.  46. 

*  N.  I.  L.  §  131:  'Where  a  negotiable  instrument  is  materially  altered 
without  the  assent  of  all  parties  liable  thereon,  it  is  avoided  except  as  against 
a  party  vvho  has  himself  made,  authorized,  or  assented  to  the  alteration,  and 
eubsequent  indorsers.  But '  a  holder  in  due  course  may  sue  upon  the  instru* 
ment  in  its  original  form. 

'  Patou  V.  Winter,  1  Taunt.  420 ;  Tarleton  v.  Shingler,  7  C.  B.  812. 


Sect.  3.]  ABSOLUTE  DEFENCES.  215 

The  exception  referred  to  arises  in  the  acceptance  of  a  bill  of 
exchange.  A  bill  may  have  been  altered  after  it  left  the 
drawer's  hands  and  before  accei)tance ;  in  such  a  Acceptance  of 
case,  though  the  acceptor  appears  to  have  accepted  '^''^• 
the  bill  in  its  altered  form,  he  has  not  done  so  in  law,  —  he  has 
presumably  intended  to  accept  the  bill  which  the  drawer  drew. 
If  he  accepted  the  bill  without  notice  of  the  alteration,  and 
without  negligence,  he  is  not  bound  by  his  act.  For  example: 
The  defendants  being  bona  fide  holders  for  value  of  a  bill  of  ex- 
change drawn  upon  the  plaintiffs,  the  bill  is  presented  to  the 
plaintiffs  for  acceptance,  and  accepted,  an  alteration  of  the  sum 
payable,  of  the  date,  and  of  the  payee's  name,  having  been 
made  in  it  after  it  passed  from  the  drawer's  hands  and  before 
acceptance.  The  acceptance  was  without  notice  of  the  alteration 
and  without  negligence.  Afterwards  the  plaintiffs  pay  the  bill, 
and  then  on  discovering  the  alteration  bring  the  present  suit  to 
recover  back  the  sum  paid.     They  are  entitled  to  recover.^ 

The  reason  is  plain.  The  drawee  of  a  bill  of  exchange  ac- 
cepts if  he  does  accept,  on  the  ground  that  payment  by  him 
gives  him  the  right  to  charge  the  amount  to  the  drawer  as  pay- 
ment  made  upon  the  drawer's  order  ;  '^  he  would  not  accept  ex- 
cept upon  that  footing,  or  upon  the  undertaking  of  some  one 
else  to  protect  him.  But  where  the  bill  is  altered  after  it  has 
left  the  drawer's  hands,  the  acceptor  cannot  on  payment  make 
such  charge;  the  drawer  has  not  directed  him  to  pay  the  altered 
bill.  Acceptance,  then,  is  not,  in  such  cases  as  the  foregoing, 
an  admission  of  the  genuineness  of  the  contents  ot  the  bill,  so 
as  to  work  an  estoppel  against  him  in  favor  of  a  holder  in  due 
course. 

If,  however,  the  drawer  himself  has  altered  the  bill  before  ac- 
ceptance, or  consented  to  the  alteration  of  it,  after  Alteration  by 
drawing  it,   the  case  will  be  different,  for  he  will  drawer, 
then   have    directed  the  drawee  to  accept  and  pay  the  bill  as 

1  Compare  Bank  of  Commerce  v.  Union  Bank,  3  Comst.  230,  bill  paid  at 
eight.  See  Clews  v.  Bank  of  New  York,  89  N.  Y.  418.  Acceptance  is  an  ad- 
mission of  the  drawer's  hand  (as  will  be  seen  later),  but  not  of  the  rest  of  the 
writing.     Id. 

2  Compare  the  language  of  the  court  in   Hortsman  v.  Hensbaw,  11  How 
177. 


216  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVL 

altered.*^  That  distinction  must  be  taken  as  the  explanation  of 
one  ©r  two  cases  which  at  first  may  seem  to  hold  broadly  that 
acceptance  of  an  altered  bill  makes  the  acceptor  liable  upon  the 
bill  as  altered.  For  example:  The  plaintiff  is  payee  of  a  bill  of 
exchange  accepted  by  the  defendant  and  now  sued  upon.  The 
bill  as  originally  drawn  was  payable  three  days  after  date,  and 
in  that  condition  was  indorsed'by  the  payee  (the  plaintiff)  for 
the  accommodation  of  the  drawer,  who  now  changes  the  word 
*  three'  to  'thirty,'  and  passes  the  bill  to  A.  The  fact  is  after- 
wards discovered,  and  an  arrangement  made  by  which  the  bill 
is  returned  by  A  to  the  plaintiff  \  then  it  is  accepted  by  the 
defendant  without  knowledge  or  notice  of  the  alteration.  The 
defendant  is  liable.^ 

'  By  a  party  to  it  or  by  one  in  lawful  possession  or  custody  of 
it.'  An  alteration  made  by  a  stranger  has  no  effect  upon  the 
Xcioi  validity  of  the  instrument  if  it  is  possible  to  show 

stranger.  what  its  language  was  before  the  act  ;  the  altera- 

tion must  be  made  by  a  party,  or  by  one  in  lawful  possession 
or  custody,  — all  others  are  strangers,  —  in  order  to  destroy  the 
instrument.^  By  a  'party'  is  meant  any  one  who  has  placed 
his  signature  to  it,  or  has  been  owner  of  or  interested  in  the 
instrument  ;  by  'one  in  lawful  possession  or  custody,'  any  one 
to  whom  the  owner  or  other  person  interested  in  the  instrument 
has  intrusted  it.* 

If  a  blank  has  been  wrongfully  filled  by  one  who  has  been 

*  If  the  drawer  altered  the  bill  after  the  acceptance,  it  would  make  no 
difference  that  the  acceptor  on  payment  could  charge  the  sum  paid  against  the 
drawer.  Scholfield  v.  Londesborough,  1894,  2  Q.  B.  660  ;  s.  c.  1895,  1  Q.  B. 
536,  and  1896,  A.  C.  .514.  The  point  however  was  assumed,  the  decision 
being  on  other  grounds. 

2  Ward  i;.  Allen,  2  Met.  53.  There  were  other  complicating  facts  in  this 
case,  but  they  have  no  bearing  upon  the  point  now  under  consideration.  The 
first  head-note  of  the  case  is  too  broad.  In  Langton  v.  Lazarus,  5  Meea.  & 
W.  629,  also,  the  alteration  was  made  by  the  drawer.  That  must  be  under- 
stood as  the  essential  fact  in  reference  to  the  acceptor's  liability. 

3  Langenberger  v.  Kroeger,  48  Cal.  147 ;  Brooks  v.  Allen,  62  Ind.  401  ; 
jEtna  Ins.  Co.  v.  Winchester,  43  Conn.  391. 

*  See  Brooks  v.  Allen  and  iEtna  Ins.  Co.  v.  Winchester,  supra. 


Sect.  3.]  ABSOLUTE  DEFENCES.  211 

intrusted  with  the  instrument,  with  power  to  fill  the  blank  or 
not  in  a  certain  contingency,  the  act  will  not  con-  Filling  blanks  .- 
stitute  a  material  alteration,  though  the  paper  was  age»cy. 
delivered  as  complete.  The  case  is  one  of  agency,  and  the 
party  whose  confidence  has  been  betrayed,  that  is,  the  princi- 
pal, will  be  bound  in  favor  of  a  bona  fide  holder  for  value. ^ 
That  assumes,  however,  that  no  alteration  of  the  written  or 
printed  language  is  made,^  unless  the  facts  indicate  an  authority 
to  alter.^ 

The  mere  fact  that  one  who  has  been  acting  as  authorized 
agent  of  the  defendant  made  the  alteration  will  not  bind  the 
supposed  principal,  for  agency  confers  no  authority  to  commit  a 
crime.*  No  relation  of  agency  exists  between  co-signers  an 
such  of  an  instrument ;  and  hence  an  alteration  made  by  one 
co-maker  of  a  promissory  note,  without  the  consent  of  the 
others,  though  before  delivery,  if  the  other  makers  have  already 
signed,  is  a  destruction  of  the  instrument  towards  the  latter.^ 

Thus  far  of  the  meaning  of  the  term  'material  alteration.' 
But  suppose  that  the  defendant,  being  maker  of  a  completed 
promissory  note,  or  drawer  of  a  completed  bill  of  Facilitating 
exchange  or  cheque,  has  facilitated  the  alteration,  alteration. 
as  for  example,  by  leaving  a  blank  space  in  the  instrument, 
which  has  afterwards  been  fraudulently  filled  out,  is  he  now 
estopped  or  barred  from  setting  up  the  alteration  ?  It  must  be 
understood  that  the  case  under  consideration  is  one  in  which  the 
instrument  left  the  hands  of  the  maker  or  drawer  as  a  complete 
instrument;  cases  of  intrusting  one's  blank  signature,  or  one'.s 
signature  to  an  uncompleted  instrument,  stand  upon  a  very  dif- 
ferent footing,  as  we  have  just  seen. 

It  has  sometimes  been  held  that  if  the  maker  or  the  drawer, 
by  leaving  a  blank,  has  made  it  easy  for  the  wrong-doer  to  fill 

1  Belknap  v.  National  Bank,  100  Mass.  376,  381 ;  Greenfield  Bank  v. 
Stowell,  123  Mass.  196,  203. 

2  Belknap  v.  National  Bank,  supra. 

3  jEtna  Ins.  Co.  v.  Winchester,  43  Conn.  391. 
♦  Id.  ;   Brooks  v.  Allen,  62  Ind.  401. 

5  Woodr.  Steele,  6  Wall.  80;  Greenville  Bank  r.  Stowell,  123  Mass.  196: 
Wood  V.  Draper,  112  Mass.  315. 


218  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XVI. 

the  blank  and  so  alter  the  instrument,  he,  rather  than  the  bona 
fide  holder  for  value,  must  bear  the  loss.  That  is  commonly  put 
upon  the  ground  of  (supposed)  negligence,  sometimes  upon  the 
ground  that  of  two  innocent  parties,  he  who  occasioned  the  loss 
must  bear  the  loss.  The  last  is,  at  best,  but  a  very  imperfect 
statement  of  law,  and  cannot  be  taken  as  satisfactory  in  any  such 
case;  and  the  first,  the  ground  of  negligence,  finds  an  answer  in 
what  has  been  said  already  in  regard  to  delivery,  —  to  wit,  the 
negligence,  if  it  be  admitted  that  there  is  negligence,  is  not  the 
legal,  otherwise  called  the  proximate  cause,  in  ordinary  cases, 
of  the  alteration.  To  be  the  legal  cause  of  what  was  done,  the 
negligence  must  have  been  in  or  in  immediate  connection  with 
the  alteration ;  the  alteration  must  have  been  the  natural  or  the 
probable  result  of  the  negligence.-^ 

Though  there  are  then  cases  to  the  contrary,^  it  may  be  safely 
stated  that  in  principle,  and  by  the  weight  of  authority,  a  ma- 
terial alteration  by  a  party,  or  by  one  in  lawful  possession,  made 
in  a  note,  bill,  or  cheque  delivered  as  a  completed  instrument 
by  writing  or  printing  words  in  a  blank  space,  destroys  the  in- 
strument according  to  unwritten  law  merchant,  so  that  no  action 
can  be  maintained  against  the  maker  or  drawer,  or  other  non- 
consenting  parties,  even  by  a  bona  fide  holder  for  value. ^  Nor 
does  it  make  any  difference  whether  the  blank  was  left  in  the 
body  or  at  the  end  of  the  instrument.  For  example:  The  plain- 
ti:ff  is  a  bona  fide  holder  for  value  of  a  promissory  note  sued 

^  In  a  case  of  the  fraudnlent  transfer  of  stock  by  the  plaintiffs'  clerk,  Bowen, 
L.  J.,  said  :  *  The  proximate  cause '  —  that  is,  the  legal  cause  —  '  was  the  felony 
and  crime'  of  the  clerk,  'and  it  cannot  be  said  that  the  felony  was  either  the 
natural  or  likely  or  necessary  or  direct  consequence  of  the  carelessness  of  the 
plaintiffs.'  Merchants  of  the  Staple  v.  Bank  of  England,  21  Q.  B.  Dir.  160. 
See  also  Bank  of  Ireland  v.  Evans  Charities,  5  H.  L.  Cas.  389  ;  Swan  v.  North 
British  Co.,  2  Hurl.  &  N.  17.5,  182  ;  Arnold  v.  Che.iue  Bank,  1  C.  P.  Div.  578  ; 
Shepard  Lumber  Co.u.  Eldridge,  171  Mass.  516  ;  Bigelow,  Estoppel,  655,  656, 
5lh  ed. 

2  Isnard  v.  Torres,  10  La.  An.  103  ;  Capital  Bank  v.  Amistrong,  62  Mo.  59  ; 
Iron  Mountain  Bank  v.  Murdock,  id.  70  ;  Ridington  v.  Woods,  45  Cal.  406. 
See  also  "Worrall  v.  Gheen,  39  Penn.  St.  388  ;  Cases,  256. 

8  Holmes  v.  Trumper,  22  Mich.  427;  Cases,  258;  Greenfield  Bank  v. 
Stowell,  123  Mass.  196,  and  cases  reviewed  therein. 


Sblt.3.]  absolute  DEFENCES.  219 

upon,  purporting  to  have  been  signed  by  the  defendant  as 
maker,  and  containing  at  the  end  the  words  '10  per  cent.' 
What  the  defendant  did  sign  was  the  instrument  in  question 
without  those  words,  delivering  the  same  as  a  completed  under- 
taking. The  instrument  signed  closed  with  the  words,  'with 
interest  at,'  after  which  there  was  a  blank,  which  after  delivery 
to  the  payee  was  filled  in  with  the  words  above  quoted,  '  10  per 
cent.'  The  defendant  is  not  liable,  the  alteration  having  the 
effect  to  destroy  the  instrument.^ 

The  contrary  view,  which  has  found  favor  in  some  of  our 
courts,  appears  to  have  been  based  originally  upon  a  misunder- 
standing of  the  effect  of  a  decision  of  the  English  Young  i;.  Grote 
Common  Pleas  in  relation  to  a  blank  space  left  in  a  misunderstood, 
cheque  just  before  the  amount  for  which  the  cheque  had  been 
made  payable;  the  drawer's  clerk,  hy  ivhovi  the  cheque  was 
drawn,  and  to  whom  the  cheque  was  then  intrusted  to  obtain 
payment,  having  raised  the  sum  payable  by  writing  certain 
words  in  the  blank. ^  But  the  contest  there  was  between  the 
drawer  of  the  cheque  and  his  banker,  the  drawee;  no  case  arose 
of  the  claim  of  a  holder  in  due  course,  and  though  it  was  held 
that  the  drawer  must  under  the  circumstances  bear  the  loss, 
nothing  was  said  about  estoppel.  Moreover  there  was  some- 
thing approaching  agency  in  the  facts.^ 

The  case  referred  to  is,  therefore,  no  authority  for  the  position 
\ipon  which  some  courts  have  acted,  that  the  drawer  of  a  cheque 
or  bill,  or  the  maker  of  a  note,  is  estopped  or  barred  from  set- 
ting up  the  alteration  in  a  suit  by  the  holder  of  the  instrument. 
The  English  courts,  followed  by  some  of  the  ablest  of  our  own, 
have  plainly  repudiated  the  idea  of  any  estoppel,  and  have  de- 
clared that  the  decision  ruust  be  understood  as  confined  in  its 
bearing  to  questions  arising  upon  facts  of  the  same  nature;  that 
is,  to  what  is  called  mandate.  Final  English  authority  has  de- 
termined that  neither  the  drawer  nor  the  acceptor  of  a  bill  owes 
any  duty  to  future  holders  to  leave  no  spaces  blank  in  the  instru- 

1  Holmes  v.  Truniper,  supra.     See  also  McGrath  v.  Clark,  56  N.  Y.  34 
But  see  Redlich  r.  Doll,  54  N.  Y.  234,  and  quaere. 

2  Young  V.  Grote,  4  Bing.  253. 

^  See  Holmes  v.  Trumper,  supra ;  Greenfield  Bank  v.  Stowell,  supra. 


220  BILLS,  NOTES,  AND   CHEQL'ES.  [Chap.  XVL 

inent.^  Tl)e  case  under  consideration,  if  to  be  regarded  as  rightly 
decided, '^  is  clearly  distinguishable  from  cases  such  as  we  have 
been  considering.' 

It  has  well  been  questioned  whether  the  leaving  of  blanks  can 
ordinarily  amount  to  negligence  at  all,  not  to  say  negligence  the 
legal  cause  of  the  loss  ;  for  it  is  impracticable  to  execute  an 
instrument,  in  ordinary  business,  without  leaving  blanks  some- 

^  The  point  is  thus  set  at  rest  by  the  House  of  Lords  in  Scholtield  i;. 
Londesborongh,  1896,  A.  C,  514,  affirming  1895,  1  Q.  B.  536,  and  1894, 
2  Q.  B.  660.  The  notion  of  negligence  is  expressly  repudiated  by  their  lord- 
ships. A  fortiori  there  is  no  duty  resting  upon  the  holder  of  a  cheque  to  see 
that  his  clerk  does  not  forge  the  holder's  name  and  then  pass  the  cheque. 
Shepard  Lumber  Co.  v.  Eldridge,  171  Mass.  516.  '  He  has  the  right  to  assume 
that  his  clerk  will  not  commit  a  crime.'  Id.  Barker,  J.,  at  p.  528.  This  was 
said  of  a  clerk  who  by  due  care  might  have  been  known  to  be  dishonest,  and 
who  was  dishonest.  '  We  are  of  opinion,'  said  the  court,  '  that  the  holder  of 
an  unindorsed  cheque,  payable  to  his  own  order,  is  under  no  legal  obligation  to 
the  drawer  to  exercise  care  as  to  how  the  cheque  shall  be  kept,  or  to  whom  he 
shall  commit  its  custody,  or  to  see  to  it  that  the  cheque  shall  not  be  put  in 
circulation  by  the  forgery  of  his  indorsement,  so  long  as  he  acts  honestly  with- 
out collusion.'  Barker,  J.,  at  p.  528.  See  Swan  v.  North  British  Co.,  2  Hurl. 
&  C,  175,  189,  190  ;  Halifax  Union  v.  Wheelwright,  L.  R.  10  Ex.  183,  192; 
Arnold  v.  Cheque  Bank,  1  C.  P.  Div.  578,  587,  588  ;  Greenfield  Bank  v. 
Stowell,  123  Mass.  196,  200,  201  ;  Holmes  v.  Trumper,  22  Mich.  427;  Ca.ses, 
258  ;  Fordyce  v.  Kasminski,  4  Am.  St.  Rep.  18  and  note  ;  People's  Bank  v. 
Franklin  Bank,  17  Am.  St.  Rep.  897,  note  ;  Burrows  v.  Klunk,  14  Am.  St. 
Rep.  371. 

2  English  judges  have  well  spoken  of  Young  v.  Grote  as  a  fountain  of  bad 
law.     Scholfield  v.  Londesborough,  1895,  1  Q.  B.  536.  Lord  Esher. 

«  The  cheque  had  been  left  in  blank  entirely,  save  signature,  by  the  drawer 
with  his  wife  for  her  use  in  his  absence,  and  the  wife  employed  the  clerk  to  fill 
in  the  sum  required.  He  did  so,  skilfully  leaving  the  blank  before  'fifty,' 
written  with  a  small  'f ' ;  and  then,  being  intrusted  with  the  cheque  to  draw 
the  money,  he  wrote  in  the  words  mentioned.  That  point  is  dwelt  upon  in 
Holmes  v.  Trumper,  supra,  as  a  'very  important  circumstance.'  The  court 
there  says :  '  The  cheque  was  filled  up  by  the  plaintift''s  clerk,  the  alteration 
made,  and  the  money  drawn  by  him  in  person,  and  the  plaintiff,  hy  employing 
him  [italics  by  the  court]  as  he  did,  as  his  clerk,  and  (through  his  wife)  as  his 
agent  to  fill  the  cheque,  and  in  person  to  draw  the  money  from  the  bankers, 
might  well  be  held  to  have  placed  a  confidence  in  him  for  which  he  should  be 
responsible,  or  at  least  to  have  authorized  the  bankers  to  place  confidence  in 
him.'  And  so  the  court  itself  in  Young  v.  Grote  distinguish  Hall  v.  Fuller, 
5  Barn.  &  C.  750,  decided  directly  the  other  way.  See  also  Greenfield  Bank  i;. 
Stowell,  supra. 


Skct.  3.]  ABSOLUTE   DEFENCES.  221 

where.  There  must  be  a  blank  at  the  beginning  or  at  the  end, 
unless,  what  not  the  most  careful  man  ever  does,  a  line  is  drawn 
before  the  first  word  and  after  the  last,  clean  to  the  signature. 
Universal  practice  cannot  be  negligence.^ 

Marginal  terms,  such  as  conditions,  stipulations,  and  the  like, 

not  being  mere  memoranda  of  facts,  such  as  the  consideration,  — 

in  other  words,  marginal   terms  which  are  intended 

.  How   marginal 

to  be  part  of  the  written  contract,  —  are  treated  by  terms  are 

the  better  authorities  as  inseparable  from  the  main  ^^^^  ^ 
writing  to  which  the  signature  is  given.  And  it  makes  no  dif- 
ference whether  such  marginalia  are  signed  or  not.  Accord- 
ingly, to  remove  such  terms,  by  cutting  them  off  or  in  any  other 
way,  without  consent,  will  be  fatal.  There  is  no  distinction, 
by  the  better  authorities,  for  there  are  decisions  to  the  contrary, 
between  cases  of  that  sort  and  cases  of  the  alteration  of  language 
in  the  body  of  the  signed  instrument.  The  instrument  signed 
has  equally  been  destroyed,  and  no  action  upon  it  can  be  main- 
tained either  in  its  present  or  in  its  original  form.^  And  the 
same  is  plainly  true  of  the  cutting  in  two  of  instruments  dex- 
terously constructed,  so  that  by  cutting  through  them  at  a  par- 
ticular place  one  part  will  be  left  in  form  a  perfect  contract 
different  in  effect  from  the  instrument  uncut.*  In  cases  such 
as  these  there  is  ordinarily  not  even  the  semblance  of  negli- 
gence, and  it  is  difficult  to  conceive  how  the  defendant  can 
be  treated  as  having  assented,  or  how  he  can  be  barred  from 
.showing  that  he  never  assented,  to  the  supposed  contract. 

^  See  the  language  of  the  court  in  Holmes  v.  Trumper,  supra,  and  the  quo- 
tation from  it  in  Greenfield  Bank  v.  Stowell,  supra.  In  regard  to  carelessly 
writing  in  pencil,  which  is  erased  and  changed,  see  Harvey  v.  Smith,  55  111. 
224;  Seibel  i-.  Vaughan,  69  111.  257. 

2  Meade  v.  Sandidge,  9  Texas  Cir.  Ap.  360  ;  Tuckerman  r.  Harwell,  14  Am. 
Dec.  232,  note  ;  Gerrish  v.  Glines,  56  N.  H.  9  ;  Johnson  v.  Heagan,  23  Maine, 
329;  Shaw  v.  First  Methodist  Soc,  8  Met.  223  ;  Fletcher  v.  Blodgett,  16  Vt. 
26  ;  Bay  v.  Shrader,  50  Miss.  326  ;  Benedict  v.  Cowden,  49  N.  Y.  396  ;  Bank 
of  America  o.  Woodworth,  18  Johns.  315  ;  s.  c.  19  Johns.  391  ;  Brill  v.  Crick, 
1  Mees.  &  W.  232.  See  also  Franklin  Sav.  Inst.  v.  Reed,  125  Mass.  365  ; 
Benthall  v.  Hildreth,  2  Gray,  288  ;  Heywood  v.  Perrin,  10  Pick.  228.  But  sea 
Cornell  v.  Nebeker,  58  Ind.  425 ;  Nebeker  v.  Cutsinger,  48  Ind.  436 ;  Ziai- 
merman  I'.  Rote,  75  Penn.  St.  108  ;  Brown  r.  Reed,  79  Fenn.  St.  370. 

*  Brown  V.  Tleed,  supra. 


222  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVL 

§  4.     Forged  Indorsement. 

Still   another  case  of  want  of  contract  arises  where  between 

the  plaintiff  and  the  defendant  there  is  a  forged  indorsement.^ 

Chain  of  title     Each  person  who  signs  a  negotiable  contract  of  the 

should  be  jg^^  merchant   undertakes  to   pay  to  any  one  who 

complete :  _  _  i    j  j 

meaning.  acquires  title  according  to  the  law  merchant.     That 

law  requires,  not  that  every  intervening  holder  of  the  paper 
between  the  plaintiff  and  the  defendant  should  have  been  owner 
of  the  instrument  or  even  the  lawful  holder  of  it,  but  that  every 
intervening  indorsement  of  an  owner  should  be  genuine.  The 
holder  may  have  a  good  claim  against  later  indorsers  ;  back  of 
the  forged  indorsement  he  cannot  go,  for  want  of  legal  assent 
on  the  part  of  the  signers.^  For  example  :  The  plaintiffs  sue 
the  defendants  to  recover  the  amount  paid  by  mistake  by  the 
plaintiffs  as  acceptors  to  the  defendants  as  holders  of  a  bilT  of 
exchange  payable  to  A,  whose  indorsement  had  been  forged. 
The  defendants  were  bona  fide  holders  for  value.  The  plaintiffs 
are  entitled  to  recover.* 

There  are  one  or  two  nominal  exceptions  to  this  rule.  The 
maker  of  a  note,  or  the  drawer  of  a  bill  or  a  cheque,  can  make  it 
Exceptions  to  payable  to  whomsoever  he  will  ;  and  if  he  makes' it 
the  rule.  payable  to  a  person  having    no  interest  in  it,   he 

may  indorse  that  person's  name,  and  put  the  instrument  into 
circulation.*  So  far  as  the  question  of  his  own  liability  upon 
the  instrument  is  concerned,  it  would  make  no  difference 
whether  the  maker  or  drawer  had  the  authority  of  the  payee  to 
indorse  his  name  or  not  ;  because  having  once  used  the  payee's 
name  for  the  purpose  of  putting  the  paper  into  circulation,  he 
could  not  afterwards  deny  his  right  to  do  so.     Indeed,   it  could 

1  Of  course  one  whose  signature  is  forged  is  not  bound.    N.  L  L.  §  30.    But 
one  may  be  estopped  by  conduct  or  words  to  set  up  the  forgery.     Id.  ;  infra, 
'  p.  226. 

^  Canal  Bank  v.  Bank  of  Albany,  1  Hill,  287  ;  Hortsman  v.  Henshaw,  11 
How.  177  ;  Cases,  274  ;  Arnold  v.  Cheque  Bank,  1  C.  P.  D.  578. 
3  Canal  Bank  i;.  Bank  of  Albany,  supra. 
*  As  to  paper  nayable  to  a  fictitious  person  see  ante,  p.  26- 


Sbct.  5.]  ABSOLUTE  DEFENCES.  223 

not  affect  the  case  that  the  payee  was  a  party  in  interest,  so  far 
as  the  liability  of  the  maker  or  drawer,  on  the  instrument,  is 
concerned.  The  act  would  be  a  forgery  and  of  course  not  bind- 
ing upon  the  party  whose  name  was  forged  ;  but  the  forger 
could  not  escape  liability  on  the  instrument  —  he  could  not 
allege  that  he  had  forged  the  payee's  name. 

More  than  that,  the  law  merchant  appears  to  hold  the  accep- 
tor of  a  bill  of  exchange  liable  notwithstanding  a  forgery  by  the 
drawer  of  the  payee's  signature,  if  the  forgery  was  committed 
before  the  acceptance.^  For  example:  The  plaintiff  is  suing 
to  recover  the  amount  of  a  bill  of  exchange  paid  by  him  as 
acceptor  to  the  defendant,  a  bona  fide  holder  for  value,  one  of 
the  drawers  of  the  bill  having,  before  the  acceptance,  forged  the 
payee's  name.  The  plaintiff  did  not  know  of  the  forgery  when 
he  paid.     He  is  not  entitled  to  recover.^ 

§  5.     Forged  Signature  of  Drawer,    etc. 

Forgery  of  the  signature  of  the  drawer  of  a  bill  of  exchange 
stands  upon  a  footing  of  its  own.  Were  it  not  for  a  special  rule 
of  law,  founded  ujion  the  natural  effect  of  accept-  Peculiarity  of ' 
ance,  the  case  would  be  m  no  wise  peculiar,  and  estoppel  to 
the  courts  would  therefore  hold  that  no  action  deny  signature. 
could  be  maintained  against  the  acceptor  by  any  person.     But 

1  Contra,  it  seems,  if  the  drawer's  forgery  was  committed  after  the  accept- 
ance. Scholfield  v.  Londesborough,  1896,  A.  C.  514,  forgery  by  drawer  in  the 
hodjij  of  the  bill. 

2  Coggill  V.  American  Bank,  1  Comst.  113.  See  Hortsmau  v.  Henshaw, 
supra.  The  acceptance  was  of  the  drawer's  order  as  the  drawer  chose  to  put 
it ;  the  drawer  could  request  the  drawee  to  pay  to  any  one  to  whom  he  made 
the  Slim  payable.  But  on  the  right  to  recover  money  back  which  has  once 
been  paid  recent  English  authority  is  opposed  to  the  current  of  American 
authority,  not  permitting  recovery  if  any  lapse  of  time  has  occurred  during 
which  the  person  receiving  the  money  might  have  changed  his  position. 
London  Bank  v.  Bank  of  Liverpool,  1896,  1  Q.  B.  7.  But  see  Bank  of  Com- 
merce V.  Union  Bank,  3  Comst.  230;  Cases,  249  ;  Leather  Manuf.  Bank  v. 
Morgan,  117  U.  S.  96  ;  Dana  v.  National  Bank  of  Republic,  132  Ma.ss.  156  ; 
Shepard  Lumber  Co.  v.  Eldridge,  171  Mass.  516  ;  Winslow  v.  Everett  Bank, 
id.  534.  In  these  American  cases  lapse  of  time  is  considered  as  no  bar  in  the 
absence  of  negligence  on  the  part  of  the  person  demanding  return  of  the  money. 


224  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVI. 

the  drawer  and  the  drawee  are,  or  they  are  generally  assumed 
to  be,  correspondents ;  they  are  ordinarily  in  close  business 
relations,  the  drawee  usually  holding  funds  of  the  drawer  and 
often  being  his  banker.  Tlie  drawee  is,  therefore,  presumably 
familiar  with  the  hand  of  the  drawer,  and  when  he  accepts  a 
bill  purporting  to  be  the  drawer's,  he  thereby  asserts  or  admits 
that  the  signature  is  the  genuine  signature  of  the  drawer.^ 

That  may  well  have  misled  a  purchaser  of  the  bill  ;  and  the 
law  therefore  holds  the  acceptor,  by  reason  of  his  acceptance, 
estopped  to  deny  his  liability  to  a  purchaser  after  acceptance 
who  is  a  bona  fide  holder  for  value  ;  the  acceptance  in  such  a 
case  is  binding,  notwithstanding  the  fact  that  the  drawer's  sig- 
nature is  a  forgery.  For  example :  The  plaintiff  sues  to  recover 
the  amount  of  a  bill  of  exchange  which  as  acceptor  he  has  paid 
to  the  defendant,  a  bona  fide  holder  for  value  who  had  dis- 
counted the  bill  after  acceptance.  The  drawer's  signature  is 
forged,  but  the  plaintiff  did  not  know  the  fact  when  he  ac- 
cepted. The  plaintiff  is  not  entitled  to  recover;  it  was  his 
duty  to  satisfy  himself  of  the  drawer's  hand  before  acceptance, 
and  his  acceptance  is  a  conclusive  admission,  in  favor  of  the 
defendant,   of  the  genuineness  of  the  signature.^ 

The  case  from  which  the  example  is  taken  went  still  further. 
Another  bill  had  been  paid  by  the  plaintiff,  on  presentment, 
without  acceptance,  the  defendant  having  already  taken  it ; 
but  the  same  rule  was  applied,  —  the  plaintiff  was  not  allowed 
to  show  that  the  drawer's  signature  had  been  forged.  The  case, 
therefore,  appears  to  go  the  length  of  holding  the  drawee  bound 
by  his  act,  whether  of  acceptance  or  payment,  though  that  act 
could  not  have  misled  the  holder  into  his  purchase  of  the  bill; 
enough  that  the  acceptance  or  payment  was  in  favor  of  a  holder 
in  due  course. 

That  doctrine  has  since  been  denied,  and  the  admission  of 
genuineness  of  the  signature  put  upon  the  ground  that  the 
drawee  has,  by  his  acceptance  or  by  some  other  act  in  recognition 
of  the  bill,  recommended  the  instrument.     If  the  bill  was  taken 

1  N.  I.  L.  §  69,  1. 

2  Price  V.  Neal,  3  Burr.  1-354  ;  Cases,  267.  That  is  the  leading  case,  and 
has  had  a  long  following.     See  Bigelow,  Estoppel,  481  et  seq.,  5th  ed. 


bi-cT.  5.]  ABSOLUlli;   DEFENCES.  225 

before  acceptance  or  other  recognition,  the  drawee,  according  to 
this  view,  is  not  bound  by  his  subsequent  acceptance  or  payment, 
and  accordingly  may  recover  the  money  back  again  if  he  has 
paid  it.^  But  tlie  question  appears  to  be  settled,  no  doubt  by 
custom,  against  this  modification  of  the  rule,  and  the  rule  es- 
tablished in  general,  that  acceptance  or  payment  by  the  drawee 
admits  the  drawer's  signature  in  favor  of  a  holder  in  due  course.' 

The  rule  however  being  founded  on  custom  may  indeed  be 
changed  by  custom.  Thus  it  is  laid  down  that  the  acceptor  may 
allege  the  want  of  genuineness  of  the  drawer's  signature,  if  he 
can  show  that  by  a  settled  course  of  business  between  the 
parties,  or  by  a  general  custom  of  the  place,  the  holder  took  upon 
himself  the  duty  of  exercising  some  particular  precaution  to 
prevent  the  loss,  and  failed  of  performing  that  duty.*  So  also 
it  has  been  held  that  if  the  holder  himself  indorsed  the  paper, 
as  for  collection,  before  it  was  presented  to  the  drawee,  the 
drawee  will  not  be  estopped  from  alleging  that  the  drawer's  sig- 
nature was  forged,  because  now  the  holder  is  thought  to  have 
asserted  the  genuineness  of  the  bill,  and  to  have  misled  the 
drawee.*  And  again,  if  the  owner  of  the  bill,  on  presenting  it 
to  the  drawee,  withhold  from  him  important  information  which 
the  former  has  touching  the  question  of  genuineness,  acceptance 
or  payment  will  not  be  binding.^ 

It  should  be  remembered  that  the  estoppel  goes  no  further 
than  to  cut  off  the  acceptor's  right  to  set  up  the  want  of  gen- 
uineness of  the  drawer's  signature,  and  that  his  acceptance  does 
not  preclude  him  from  asserting  that  other  signatures,  with  an 
exception   above   mentioned    (where    the   drawer   indorses   the 

1  McKleroy  v.  Southern  Bank,  14  La.  An.  458  ;  Cases,  270. 

2  N.  I.  L.  §  69,  1,  making  no  distinction ;  Lyndonville  Bank  v.  Fletcher, 
68  Vt.  81  ;  National  Bank  of  North  America  v.  Bangs,  106  Mass.  441  (a 
cheque)  ;  First  National  Bank  v.  First  National  Bank,  58  Ohio  St.  207 
(a  cheque)  ;  First  National  Bank  v.  Northwestern  Bank,  152  III.  296  ;  Marine 
Bank  v.  National  City  Bank,  59  N.  Y.  67 ;  National  Park  Bank  i;.  Ninth 
National  Bank,  46  N.  Y.  77  ;  Bills  of  Exchange  Act,  §  54  (2). 

»  Ellis  i;.  Ohio  Ins.  Co.,  4  Ohio  St.  628 ;  First  National  Bank  v.  First 
National  Bank,  supra. 

*  National  Bank  of  North  America  v.  Bangs,  106  Mas.s.  441. 
s  First  National  Bank  v.  Ricker,  71  111.  439. 

16 


226  BILLS,  NOTES,  AND   CHEQUES.  [Chap  XVr. 

payee's  name),  are  not  genuine,  or  that  the  body  of  the  bill  has 
been  altered.^ 

There  are  other  cases  also  in  which  the  defendant  has  become 
barred  of  the  right  to  allege  want  of  contract  between  himself 
Other  cases  of  3,nd  the  holder  of  the  paper.  Thus,  to  acknowl- 
estoppel.  edge  a  signature  as  one's  own  will  preclude  one 

from  asserting,  against  a  bona  fide  holder  for  value,  who  takes 
the  paper  thereupon,  that  the  signature  is  not  genuine. '^  So 
also  if  it  appear  that  there  has  been  a  regular  course  of  dealing, 
in  which  bills  have  been  accepted  by  a  clerk  or  agent  whose 
signature  has  been  acted  upon  b}^  all  parties  concerned  as  the 
signature  of  the  employer  or  principal,  the  fact  will  afford  very 
strong  evidence  against  the  latter  that  he  has  authorized  the 
acceptance  in  the  present  case.^  But  a  person  is  not  bound  as 
acceptor  of  a  bill  of  exchange  bearing  a  forged  acceptance  by 
the  mere  fact  that  he  has  previously  paid  one  bill  similarly 
forged,  unless  he  has  actually  led  the  holder  to  believe  in  some 
other  way  that  the  present  acceptance  is  genuine.* 

§  6.     Incapacity. 

Incapacity,  natural  or  legal,  to  contract,  by  way  of  making, 
accepting,  drawing,  or  indorsing,  is  a  defence  in  all  cases  in 
favor  of  the  incompetent  party,  and,  it  may  be  added,  as  in  con- 
tracts of  the  common  law,  in  favor  of  him  only.  It  matters  not 
what  false  representations  touching  capacity  may  have  been 
made,  as,  for  instance,  by  an  infant  that  he  is  of  age ;  ®  it  matters 

^  First  National  Bank  v.  Nortliwestern  Bank,  152  111.  296  ;  Corn  ExchaiigK 
Hank  v.  Nassau  Bank,  91  N.  Y.  74  ;  Lyndon ville  Bank  v.  Fletcher,  68  Vt.  91. 

2  N.  I.  L.  §  30  ;  Buck  v.  Wood,  85  Maine,  204  ;  Rosenplanter  v.  Toof, 
100  Tenn.  92  ;  Goodell  v.  Bates,  14  R.  L  65;  Cohen  v.  Teller,  93  Penn.  St. 
123  ;  Kudd  v.  Matthews,  79  Ky.  479.  See  Bank  of  United  States  v.  Bank  of 
Georgia,  10  Wheat.  333,  which  goes  still  further.  But  see  Koons  v.  Davis, 
84  Ind.  387,  389,  which  may  be  doubted. 

8  Morris  v.  Bethell,  L.  R.  5  C.  P.  47 ;  Crout  v.  DeWolf,  1  R.  L  393. 

*  Morris  v.  Bethell,  supra ;  Cohen  v.  Teller,  supra. 

^  Compare  Baker  v.  Stone,  136  Mass.  405 ;  Merriam  v.  Cunningharu, 
11  Cush.  40;  Alvey  v.  Reed,  114  Lid,  148  ;  Wieland  v.  Kobick,  110  III  16  ; 
Burley  i;.  Russell,  10  N.  H.  184  ;  Bartlett  v.  Wells,  1  Best  &  S.  836.  But 
see  Kilgore  v.  Jordan,  17  Texas,  341. 


Sect.  6]  ABSOLUTE   DEFENCES.  227 

not  that,  besides  false  representations  of  tlie  kind,  the  paper 
has  passed  for  value  and  without  notice  into  the  hands  of  aa 
indorsee.  In  some  States  a  contrary  rule  obtains  with  regard 
to  unauthorized  contracts  made  by  a  partner  in  trade  in  the 
Jiame  of    his  partnership.^ 

It  does  not  follow  in  law,  however,  from  the  fact  that  inca- 
pacity is  a  defence  to  an  action  upon  the  party's  supposed  con- 
tract, that  he  may  not  have  capacity,  when  a  holder, 
to  transfer  the  paper  to  another.  In  regard  to  the  transfer  dis- 
power  of  transferring  ownership  of  the  instrument,  ^ 
some  authorities  ap[tear  to  distinguish  between  mental  or  natural 
incapacit}',  and  incapacity  created  by  or  due  to  some  regulation 
of  law  merely,  that  is,  legal  incapacity.  According  to  such 
authorities,  if  the  party's  incapacity  is  due  to  mental  defect, 
he  cannot,  of  his  own  will  and  act,  transfer  the  title  to  the 
paper  which  he  owns.^  Other  authorities  hold  that  transfer  in 
such  a  case  would  be  voidable  only,  not  void,  and  hence  would 
be  good  in  favor  of  a  holder  for  value  without  notice  of  the 
incapacity,  at  least  until  repudiated  by  the  lawful  guardian  of 
the  party.*  If  the  incapacity,  aside  from  that  of  a  married 
woman  at  common  law,  is  merely  legal,  as  in  the  case  of  an 
infant  possessed  of  full  mental  capacity,  or  of  a  corporation,  the 
title  clearly  may  be  passed  by  him  in  favor  of  any  subsequent 
holder  against  other  parties  than  the  infant  or  corporation  ;  and 
that  too  whether  the  transfer  is  by  indorsement  or  not.* 

*  See  the  cases  cited  in  Farmers'  Bank  v.  Butchers'  Bank,  16  N.  Y.  I'i.'), 
135;  Smith  v.  Weston,  159  N.  Y.  194 ;  American  Co.  v.  Bourn,  29  S.  E.  182  ; 
s.  c.  69  Am.  Dec.  678.  But  see  Worster  v.  Forbush,  171  Mass.  423,  not  a 
trade  partnership. 

2  Rogers  v.  Blackwell,  49  Mich.  192 ;  Hosier  v.  Beard,  54  Ohio  St.  398  ; 
s.  c.  35  L.  R.  A.  161  and  note  ;  Moore  v.  Hershey,  90  Penn.  St.  196  ;  Wire- 
bach  V.  Bank,  97  Penn.  St.  543.  It  is  admitted  in  Hosier  v.  Beard  that  tlie 
contrarj'  would  be  true  by  tlie  weight  of  authority  if  the  instrument  were  given 
for  necessarips,  or  where  it  was  obtained  in  ignorance  of  the  party's  incapacity 
(insanity)  and  for  full  consideration  received  by  him.  Mathiessen  »».  McMa- 
hon,  38  N.  J.  536  ;  Young  v.  Stevens,  48  N.  H.  133. 

^  Hosier  v.  Beard,  supra  ;  Carrier  v.  Sears,  4  Allen,  336,  explaining  Peaslee 
V.  Robbin.s,  3  Met.  164,  seemingly  contra  ;  Burke  v.  Allen,  29  N.  II.  106  ;  Asli- 
croft  V.  De  Armond,  44  Iowa,  229  ;  Riggan  v.  Green,  80  N.  C.  236. 

*  N.  I.  L.  §  29  ;  Burke  v.  Allen,  29  N.  H.  106.     But  see  Hosier  v.  Beard, 


228  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVL 

A  few  words  further  should  be  said  concerning  corporations 

in   this   connection.      A  corporation  created  by  statute  has,  by 

reason  of  its  creation  by  statute,  such  powers  only 

Corporations.  "  ,..,  - 

as  the  statute  directly  or  by  plain  inference  confers 
upon  it,  in  other  words,  only  the  powers  conferred  and  their  inci- 
dents. A  corj)oration,  as  such,  has  no  inherent  power  to  bind 
itself  generally  by  making,  accepting,  drawing,  or  indorsing 
paper  of  the  law  merchant  even  in  favor  of  a  bona  fide  holder  for 
value ;  power  so  to  bind  itself  must  be  given  to  it  by  the  legis- 
lature, either  directly  or  by  plain  inference.^  But  in  so  far  as 
the  corporation  has  power  to  make  a  particular  contract,  it  has 
power  incidentally,  that  is,  by  plain  inference,  to  make,  accept, 
draw,  or  indorse  in  respect  of  such  contract.^  For  example :  A 
company  is  incorporated  to  construct  a  railway.  The  directors 
are  empowered  to  do  whatever  the}'^  may  consider  incidental  or 
conducive  to  the  object.  In  furtherance  of  that  object  they 
accept  a  bill  drawn  upon  them.  The  acceptance  is  binding.' 
Again:  The  same  corporation  accepts  a  bill  drawn  upon  it  in 
favor  of  the  objects  of  another  railway-construction  company. 
The  acceptance  is  not  binding.* 

A  corporation  then  may  have  power  to  make  one  kind  of  con- 
tract, and  not  have  power  to  make  a  contract  of  another  kind; 
and  the  result  is,  that  accepting,  making,  or  indorsing  paper  of 
the  law  merchant  in  the  latter  sort  of  case  is  not  binding  even 
in  favor  of  a  holder  in  due  course.  Nor,  by  the  better  view, 
will  the  case  be  affected  by  the  circumstance  that  the  corpora- 
tion may  have  made  false  representations  of  its  powers.^     But 

supra.  That  assumes  of  course  that  the  party  owns  the  paper  (or  has  au- 
thority of  the  owner  to  transfer).  At  common  law  a  married  woman  could 
not  transfer  paper  made  or  indorsed  to  her  when  single  ;  hut  the  reason  was, 
not  because  she  was  incompetent  to  contract,  which  is  another  thing,  but  be- 
cause the  paper,  after  her  marriage,  was  no  longer  hers. 

1  Mott  V.  Hicks,  1  Cowen,  513  ;  In  re  Peruvian  Ry.  Co.,  L.  R.  2  Ch.  617. 

'  In  re  Peruvian  Ry.  Co.,  supra ;  Came  r.  Brigham,  39  Maine,  35  ;  Curtis 
V.  Leavitt,  15  N.  Y.  9. 

8  In  re  Peruvian  Ry.  Co.,  L.  R.  2  Ch.  617. 

*  Smead  v.  Indianapolis  R.  Co.,  11  Ind.  104.  Qu.  whether  overruled  by 
Madison  R.  Co.  v.  Norwich  Society,  24  Ind.  457,  461. 

*  Northern  Bank  v.  Porter,  110  U.  S.  608. 


^..^.^.^r*  'JLe>  <*-«-C£*><ja_  4^  fli^^«t_^^-«ritcI^L.***-»  ,    ^-^  6»»^  thtAM.  n  «.  v^^  c 

if^^i^eaduf*  being' whoily^without  power  tomake  the  contract' 
it  had  power  to  make  it,  though  not  in  the  way  or  by  the  means 
employed,  or  if  it  had  power  to  make  contracts  whidi  ordi- 
narily would  include  the  one  in  question,^  the  corporation  will 
be  liable  to  holders  in  due  course.^  It  should- fiirther  be  ob- 
served, as  was  said  above  of  other  cases,  that  the  incapacity  of 
a  corporatiuiLto^ contract  in  the  particular  case  does  not  imply 
^-^^         incapacity  to  transfer  title.'  ^ 

§  7.     Illegality  :  Instruments  Void  by  Statute. 

Illegality   is    not    necessarily   an    absolute   defence;   in    most 
cases  it  is  only  an  equity.     And  that   may  be  true  though  theA>v^^ 
courts  go  so  far  as  to  say  in  a  particular  case  that  Statute  and    ^^ 
the  contract  is  absolutely  void  for  illegality,  unless  ^^mhv^*- 
the  statement  is  made  upon  authority  of  statute.  ^guisHM- 
If  statute  in  terms  declare  a  contract  void  without  qualitication, 
it  cannot  be  enforceable  even  under  the  law  merchant;   whereas 
if  a  contract  is  declared  void  by  the  common  law,   or  by  con- 
struction of  some  statute  which  does  not  plainly  declare  it  void, 
it  will  not  necessarily  be  void  in  the  law  merchant.     In  other    |^ 
words,    a  contract  which,  by  loose  construction  of  statutes    or  \ 

under  the  operation  of  the  common  law,  or  between  immediate 
parties  under  the  operation  of  the  law  merchant,  may  be  called 
void  or  even  *  absolutely  void, '  —  a  term  sometimes  used,  but 
with  doubtful  fitness,  —  is  not  necessarily  void  when  it  takes 
the  form  of  negotiable  paper,  and  is  found  in  the  hands  of  a 
bona  fide  holder  for  value. 

The  difference  between  what  we  have  called  loose  construc- 
tion, and  plain  language  of  statute,  may  be  shown  by  comparing 
the  case  of  a  promissory  note  made  on  Sund.ay,  with  that  of  a 
promissory  note  made  under  a  statute  like  an  old  one  in  Massa- 
chusetts which  declared  that  notes  under  $5.00  should  be  en- 
tirely in  writing,  otherwise  they  were  to  be   'utterly  void;'   or 

1  American  Bank  v.  Gluck,  68  Minn.  129. 

2  N.  I.  L.  §  29.  See  upon  this  whole  subject,  Bigelow,  Estoppel,  464- 
469,  .5th  ed. 

^  Brown  v.  Donnell,  49  Maine,  427. 


230  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVI 

under  the  old  usury  statutes.  The  statutes  in  regard  to  Sunday 
observance  do  not  declare  that  contracts  made  on  Sunday  shall 
be  void,  nor  do  they  use  language  which  necessarily  or  naturally 
bears  such  a  meaning;  it  is  only  by  loose  language  that  Sunday 
contracts  have  been  declared  to  be  'void '  or  'absolutely  void.'  * 
Now,  no  action  could  bo  maintained  under  the  old  statute  in 
regard  to  notes  under  $5.00,  or  under  any  other  statute  using 
the  like  plain  language,  — not  even  a  bona  fide  holder  for  value 
could  maintain  an  action;  whereas  the  contrary  would  be  true 
of  such  a  holder  of  a  note  made  on  Sunday.  The  statute  in  the 
one  case  creates  a  legal  defence,  in  the  other  an  equity.  For 
example :  The  plaintiff  is  bona  fide  holder  for  value,  and  the  de- 
fendant maker,  of  a  large  number  of  promissory  notes  sued  upon, 
each  under  .$5.00,  and  each  bearing  the  impression  of  printing, 
and  issued  after  April  1,  1805,  though  bearing  an  earlier  date. 
They  are  antedated  with  a  view  to  avoid  a  statute  which  declares 
notes  of  the  kind,  made  or  issued  after  said  date,  to  be  '  utterly 
void.'  The  plaintiff  cannot  recover.^  Again:  The  plaintiflf  is 
holder  for  value  bona  fide,  and  the  defendant  is  maker  of  a 
promissory  note  sued  upon,  made  and  payable  in  the  State  of 
New  York  upon  a  usurious  consideration;  the  statutes  of  that 
State  declaring  contracts  made  upon  usurious  consideration  to 
be  void,  without  qualification.  The  plaintiff  cannot  recover.* 
Again  (under  Sundaj^  laws)  :  The  plaintiff  is  a  bona  fide  holder 
for  value,  and  the  defendant  is  maker  of  a  promissory  note  sued 
Tipon,  which  note  was  made,  dated,  and  delivered  Sept.  4,  1892, 
which  day  was  Sunday,  and  payable  four  months  after  date. 
The  plaintiff  discounted  the  note  in  the  month  of  December  fol- 
lowing.     He  is  entitled  to  recover.'* 

Sometimes  statutes  which  declare  that  contracts  made  in  vio- 
lation of  them  shall  be  void,  make  an  exception  in  favor  of  bona 

^  Between  the  parties  the  contract  may  properly  be  said  to  be  absolutely 
void  where  it  is  incapable  of  being  ratified  or  otherwise  made  good. 

2  Bayley  v.  Taber,  5  Mass.  286 ;  Cases,  286. 

8  See  Holmes  v.  "Willianis,  10  Paige,  326  ;  Mordecai  v.  Dawkins,  9  Rich. 
262;  Towne  v.  Rice,  122  Mass.  67,  71. 

*  See  State  Banlc  v.  Thompson,  42  N.  H.  369.  And  compare  Horton  v. 
Buffiuton,  105  Mass.  399. 


Rbot.  8.]  ABSOLUTE   DEFENCES.  231 

fide  holders  for  value  of  negotiable  instruments  so  made,  as  in 
the  case  of  a  prohibitory  liquor  law  which  declares  paper  made 
in  violation  of  its  provisions  'utterly  null  and  void  against  all 
persons,  and  in  all  cases,  excepting  only  as  against  the  holders 
.  .  .  who  may  have  paid  therefor  a  fair  price  .  .  .  without  no- 
tice or  knowledge  of  such  illegal  consideration.'  In  such  a 
case,  again,  the  illegality  becomes  an  equity,  and  by  force  of 
the  statute  itself  the  bona  fide  holder  for  value  is  entitled  to 
recover  payment  of  the  paper. ^ 

§  8.     Statutes  of  Limitation. 

These  statutes  make  an  absolute  defence.  Holders  do  not 
necessarily  have  notice  whether  the  period  of  limitation  has  run 
out  or  not.  The  instrument  may  not  be  dated,  or,  Not  a  mere 
what  is  usual,  an  indorsement  may  not  be  dated  ;  ^q^'^y. 
but  the  real  date  of  the  act,  or  rather  of  the  delivery  following 
it,  may  be  shown,  where  there  is  nothing,  such  as  subsequent 
payments  of  interest,^  or  instalments,  to  prevent  the  running  of 
the  statute  from  that  time.' 

1  Paton  V.  Coit,  5  Mich.  505. 
*  Topeka  Company  v.  Meniani,  60  Kans.  397. 

'  Payment  by  the  maker  of  an  indorsed  note  will  not  stop  the  ninniug  of 
"^e  statute  iu  favor  of  the  indorser.     Maddox  v.  Duncan,  143  Mo.  613. 


f,    4    3^^..*^  W^f  ^^ 


232  BILLS,  NOTES,  AND  CHEQUES.        [Chap.  XVIL 


CHAPTER  Xyil. 

EQUITIES. 

§  1.     Bona  Fide  Holder  for  Value,  or  Holder  ik 

Due  Course. 

Equities,  as  we  have  seen,  imply  the  existence  of  a  contract, 
the  contract,  because  of  such  defences,  being  defeasible  between 
What  equities  the  parties  to  the  equities  and  all  others  standing 
'""P'^'-  <  in  their  shoes,'  but  binding  in  favor  of  bona  fide 

holders  for  value  or  holders  in  due  course.^  This  is,  indeed,  the 
great  field  of  bona  fide  holders  for  value,  the  field  in  which  the 
rights  of  such  holders  stand  out  conspicuously  as  the  most  fav- 
ored in  the  law.  It  is  here  that  the  law  merchant  appears  iu 
its  strongest  colors  and  in  its  most  striking  contrast  to  the 
common  law. 

Purchase  for  value  and  without  notice  cuts  off  equities  is  the 
cardinal  rule.  A  holder  in  due  course,  the  Statute  declares, 
holds  the  instrument  free  from  any  defect  of  title  of  prior  par- 
ties, and  free  from  defences  available  by  such  parties  among 
themselves,  and  may  enforce  payment  of  the  instrument  for  the 
full  amount  against  all  parties  liable  thereon.'' 

*  Holder  *  in  due  course'  is  the  well-chosen  term  of  the  American,  follow- 
ing the  English,  Statute,  shortly  expressing  the  idea  stated  more  fully  and  also 
more  concretely  in  the  words  'bona  fide  holder  for  value.'  The  Statute  de- 
fines the  holder  in  due  course  as  one  who  has  taken  the  instrument  (1)  aa 
complete  and  regular  on  its  face,  (2)  before  it  became  overdue  and  without 
notice  of  any  dishonor  of  it,  (3)  in  good  faith  and  for  value,  (4)  and  without 
motice  of  any  infirmity  in  it  or  defect  of  title  in  the  hands  of  the  person  nego- 
tiating  it.  N.  L  L.  §  91.  See  Bills  of  Exchange  Act,  §  29.  That  then  is 
what  is  meant  also  by  the  expression  '  bona  fide  holder  for  value. 

2  N.  L  L.  §  64  ;  Memphis  Bethel  v.  Bank,  101  Tenn.  130  (purchase  for 
value  from  trustee  without  notice  of  breach  of  trust  by  him).  But  it  seems 
that  a  holder  subject  to  equities  may  be  liable  to  prior  parties  in  damages  if 
lie  transfers  the  instrument  to  a  holder  in  due  course  and  a  prior  party  is  com- 
pelled to  pay.  Nashville  Lumber  Co.  r.  Fourth  National  Bank,  94  Tenn. 
374;  s.  c.  27  L.  R.  A.  519,  and  note. 


Sect.  2.]  EQUITIES.  233 

The  first  thing  then  to  be  grasped  is  the  meaning  of  the  term 
'bona  fide  holder  for  value.'  The  term  is  one  of  deliberately 
chosen  use,  each  part  of  it  having  a  characteristic  meaning,  and 
each  part  being  necessary  to  give  the  party  the  paramount  rights* 
above  mentioned;  though  where  it  is  not  important  to  make  any 
distinction,  either  part  of  the  expression  is  often  used  for  the 
whole.  But  to  enable  the  holder  to  occupy  the  most  favored 
position,  he  or  some  one  before  him  must  have  been  both  a  bona 
fide  holder  and  a  holder  for  value.  What,  then,  constitutes  one 
a  bona  fide  holder,  and  what  a  holder  for  value  ? 

A  preliminary  general  remark  should  be  made.  Ordinarily 
there  intervenes  between  the  bona  fide  holder  for  value,  with  the 
special  rights  of  such  party,  and  the  defendant  at  least  one  per- 
son. But  that  is  not  necessary;  the  payee  of  a  bill  of  ex- 
change, or  of  a  cheque,  or  even  of  a  promissory  note,^  or  the 
drawer  of  a  bill  or  cheque,^  may  be  such  a  holder,  as  for  in- 
stance where  the  instrument  has  been  offered  to  the  payee  for 
discount  and  so  purchased. 

§  2.     Bona  Fide  Holder:  Notice:  Negligence. 

The  term  'bona  fide  holder,'  properly  speaking,  means  a 
holder  according  to  the  law  merchant,  without  knowledge  or 
notice  of  equities  of  any  sort  (defences  not  abso-  Meaning  of 
lute)  which  could  be  set  up  against  a  prior  holder  of  ^^'■™- 
the  instrument.  Absence  of  knowledge  or  notice  of  the  defenca, 
when  the  instrument  was  taken,  is  the  essential  thing  in  th® 
matter  of  bona  fides.     Notice  calls  for  very  special  explanation. 

In  other  departments  of  law  notice  may  be  either  absolute  or 
constructive.     The  contrast  to  constructive  notice   ak   i  »       d 
is  usually  put  as  actual  notice;  but  that  is  an  ob-  constmctiva 
jectionable  designation;    it  naturally  suggests,  and 
indeed  is  commonly  used  and  understood  to  mean,  knowledge.* 

1  Lookout  V.  AtiU,  93  Tenn.  645 ;  Passumpsic  Bank  v.  Goss,  31  Vt.  315 ; 
WilletT.  Parker.  2  Met.  608;  Deardortf  y.  Forsenian,  24  Ind.  481. 

2  Merritt  v.  Duncan,  7  Heisk.  156. 

*  As  a  matter  of  fact,  '  actual  notice  '  in  the  law  of  bills  and  notes  means 
knowledge  ;  but  it  would  be  better  to  say  that  the  plaintiff  had  kuowledgs, 
than  that  he  had  actual  notice. 


234  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVIL 

But  that  leaves  too  much  for  constructive  notice  ;  it  leaves 
much  to  that  kind  of  notice  which  is  not  '  constructive '  at  all, 
as,  for  example,  notice  hy  the  public  registry'.  And  if  notice  by 
the  registry  be  called  actual  notice,  then  actual  notice  is  used 
in  inconsistent  senses;  in  one  sense  it  means  knowledge;  in 
another,   something  short  of  knowledge. 

The  terra  'absolute  notice'  creates  no  such  confusion;  it  does 
not  suggest  or  mean  knowledge  at  all.  It  means  the  kind  of 
notice  which  in  and  of  itself  is  notice;  the  registry,  for  ex- 
ample, is  notice  in  and  of  itself,  —  the  Statute  makes  it  so,  and 
it  is,  therefore,  absolute  notice;  taking  a  negotiable  bill  or  note 
after  maturity  is  in  and  of  itself  notice  (of  equities,  if  any 
exist),  —  the  law  merchant  makes  it  so,  and  hence  it  is  abso- 
lute notice.  Whether  there  is  knowledge  or  not  in  these  cases 
is  immaterial. 

*  Constructive  notice  '  is  a  very  different  thing  both  in  mani- 
festation and  in  effect.  It  arises  from  facts  putting  one  upon 
^  .  inquiry;  a  person  has  been  put  upon  a  trail.      The 

notice:  negli-  trail  must  be  followed,  but  if  followed  with  proper 
diligence,  there  is  an  end  of  the  notice  altogether, 
whatever  the  result.  The  notice  attaches,  in  other  words,  only 
when  the  trail  is  not  taken  up  and  diligently  followed,  that  is, 
when  there  is.negligence. 

In  still  other  words,  and  dropping  the  figure,  constructive 
notice  imports  knowledge  of  a  preliminary  fact  or  set  of 
facts  which  would  suggest  to  the  average  man  the  existence  of 
some  ulterior  fact  of  importance;  the  preliminary  fact  puts  him 
upon  inquiry  concerning  the  probable,  ulterior  fact.  If  he  does 
not  pursue  the  inquiry  suggested,  or  if  he  pursues  it  faithlessly 
rather  than  faithful! 3',  he  is  fixed  with  notice  of  it;  he  stands 
as  if  he  knew  it.  Thus,  a  man  about  to  buy  a  horse  hears  of  a 
fact  which  would  suggest  to  a  man  of  average  intelligence  that 
perhaps  another  may  have  an  unrecorded  lien  upon  the  animal. 
Now  if  that  man  buys  the  horse  without  making  any  inquiry  in 
regard  to  the  possible  lien,  he  will  buy  it  with  notice  if  any 
lien  in  fact  exists;  on  the  other  hand,  if  he  makes  diligent 
inquiry,  and  his  suspicion  is  entirely  removed,  he  takes  title 
free  from  the  defect  though  in  point  <^)f  fact  there  was  a  lien. 


Si,c7  -2.]  EQUITIES.  235 

Absolute  notice,  as  we  have  seen,  is  part  of  the  law  of  bills, 
notes,  and  cheques;  and  it  was  at  one  time  supposed  that  con- 
structive notice  —  by  putting  upon  inquiry  and  negligence  — 
was  also,  in  the  full  sense  of  the  term,  part  of  the  same  law, 
and  in  some  States  it  is  to  this  day.  For  example:  The  plain- 
tiff, a  banker,  is  indorsee  of  a  bill  of  exchange,  accepted  by  the 
defendant,  and  now  sued  upon.  The  bill,  indorsed  in  blank, 
was  offered  to  the  plaintiff  for  discount  by  an  entire  stranger  to 
him.  The  plaintiff  makes  no  inquiry  of  the  stranger  concerning 
his  title  or  right  to  the  bill,  and  discounts  it.  The  stranger 
had  found  the  bill,  and  had  no  right  to  it  except  as  finder.  The 
plaintiff  (by  some  authorities  on  the  unwritten  law)  cannot 
recover,  having  constructive  notice  that  the  stranger  had  no 
right  to  the  bill;  it  was  the  plaintiff's  duty,  the  bill  being 
offered  by  a  stranger,  to  make  inquiry,  and  he  was  guilty  of 
negligence  in  failing  to  make  it.^ 

This  rule  of  constructive  notice  was  laid  down  in  England  in 
the  year  1824,  and  was  maintained  there  until  the  year  1836, 
when  it  was  overturned.  The  rule  of  1824  was  never  quite 
satisfactory,  and  it  was  finally  declared,  in  1836,  in  effect,  that 
this  doctrine  of  constructive  notice,  by  way  of  negligence,  being 
a  bar  to  the  demand  of  a  holder  who  had  paid  value  and  was  not 
otherwise  affected  with  notice,  was  unsuited  to  the  law  mer- 
chant as  applied  to  bills  and  notes,  that  is,  it  was  inconsistent 
with  custom ;  and  the  contrary  was  now  firmly  and  finally  laid 
down. 

Negligence  only,  even  though  gross,  accordingly  was  and 
still  is  in  England  held  insufficient  to  defeat  the  claim  of  one 
whose  right  to  recover  is  otherwise  perfect;  nothing  short  of 
bad  faith  will  suffice  to  subject  him  to  the  equities  which  the 
defendant  seeks  to  set  up.^  And  that  has  long  been  the  pre- 
vailing rule  in  this  country,  the  most  of  our  courts  which  had  at 
first  accepted  the  earlier  doctrine  having,  since  1836,  abandoned 

5  Gill  V.  Cubitt,  3  Barn.  &  C.  466  ;  Sturgis  v.  Metropolitan  Bank,  49  111. 
220,227;  Merritt  i>.  Duncan,  7  Heisk.  156;  Limerick  Bank  v.  Adams,  70 
Vt.  132. 

*  Goodman  v.  Harvey,  4  Ad.  &  E.  870. 


236  BILLS,  NOTES,  AND   CHEQUES  [Chap.  XViL    ' 

that  doctrine  for  the  one  just  stated.  For  example :  The  plain- 
tiff is  an  indorsee  for  value  of  a  bill  of  exchange  now  sued 
upon,  which  was  purchased  by  him  in  good  faith,  in  point  of 
fact,  and  the  defendant  is  acceptor  thereof.  At  the  trial  the 
following  instruction  was  given  to  the  jury  :  '  If  such  facts  and 
circumstances  were  known  to  the  plaintiff  as  caused  him  to 
suspect,  or  would  have  caused  one  of  ordinary  prudt^nf^c  to  -^na- 
^ectj  that  the  drawer  had  no  interest  in  the  bill,  and  ao 
authority  to  use  the  same  for  his  own  benefit,  and  by  ordinary 
diligence  he  could  have  ascertained  these  facts,'  the  plaintiff 
cannot  recover.  The  instruction  was  erroneous  ;  nothing  short 
of  bad  faith  would  overcome  the  plaintiff's  demand,  and  the 
plaintiff  need  not  show  the  absence  of  bad  faith.  ^ 

Proof  of  bad  faith  will  subject  the  plaintiff  to  equities,  if 
such  exist;  and  bad  faith  may  be  shown,  for  instance,  by  evi- 
Bad  faith :  dence  that  he  himself  actually  had  reasonable 
orcoTstrucUve  susjiiciotflvom  facts  within  his  knowledge,  that 
notice.  the  prior  holder's    title    was    somehow    tainted  or 

defective,  and  still  went  forward  and  purchased  the  instrument, 
closing  his  eyes  to  the  facts  and  not  making  inquiry.^  To  that 
extent  the  doctrine  of  constructive  notice,  a  term  which  may 
cover  cases  of  bad  faith  as  well  as  of  negligence,  obtains  in  the 
law  of  bills,  notes,  and  cheques,  and  to  that  extent  only,  except 
in  the  few  States  in  which  the  courts  still  adhere  to  the  Englisii 
doctrine  of  1824. 

There  is  then  a  limited  sense  in  which  it  is  still  true  that 
putting  one  upon  inquiry  is  (constructive)  notice,  if  the  inquiry 
be  not  pursued  ;  but  it  is  not  the  sense  in  which  putting  upon 
inquiry  amounts  to  notice  by  the  common  law  or  in  equity, 
which   proceeds    upon   the   footing   that    it  is  enough   that   it 

^  Goodman  v.  Siraonds,  20  How.  343.  See  also  Lancaster  Bank  v.  Garber, 
178  Penn.  St.  91;  Second  National  Bank  i-.  Morgan,  165  Penn.  St.  199; 
heever  i;.  Pittsburgh  R.  Co.,  150  N.  Y.  59  ;  N.  I.  L.  §  63  :  '  To  constitute 
iiotice  of  an  infirmity  in  the  instrument  or  defect  in  the  title  of  the  f«rson 
negotiating  the  same,  the  person  to  whom  it  is  negotiated  must  have  had 
actual  knowledge  of  the  infirmity  or  defect  or  knowledge  of  such  facts  that  hia 
action  in  taking  the  instrument  amounted  t(^^^aith.' 
3  Jones  V.  Gordon,  2  App.  Gas.  216,  228. 


Sect  2]  EQUITIES.  237 

would  be  negligence  not  to  inquire.  When  by  the  general  law 
merchant  putting  upon  inquiry  amounts  to  constructive  notice, 
the  facts  suggesting  inquiry  are  strong  and  decisive,  so  that  to 
turn  away  from  them  amounts  not  merely  to  negligence,  or 
even  gross  negligence,  but,  as  the  Statute  well  puts  it,  to  bad 
faith. 

That  must  be  the  sense,  where  the  later  English  rule  has 
been  adopted,  when  it  is  said  that  a  purchaser  of  a  negotiable 
instrument  takes  it  with  notice  if  he  had  knowledge  of  circum- 
stances sufficient  to  put  him  upon  inquiry.^  Thus  it  might 
be  said  that  an  officer  of  a  corporation  making  paper  of  the  cor- 
poration payable  to  himself,  and  then  attempting  to  deal  with 
it  for  his  own  benefit,  to  the  knowledge  of  the  purchaser,  puts 
the  purchaser  upon  inquiry,  because  he  could  not  turn  away 
from  such  facts  without  the  imputation  of  bad  faith.'  But  the 
expression  is  misleading  and  highly  objectionable  except  when 
applied  to  constructive  notice  in  the  broad  common  law  sense. 
The  two  senses  in  which  the  term  '  constructive  notice, '  or 
the  putting  one  upon  inquiry,  is  used  should  then  be  clearly 
observed. 

Suppose  that  on  the  face  of  the  instrument  it  appears  that  the 
holder  from  whom  it  has  been  purchased  is  a  trustee.  Is  this  a 
fact  from  which  one  may  turn  without  inquiry  ?  In  purchase  from 
those  States  in  which  the  English  rule  of  1824  pre-  trustee, 
vails,  to  wit,  the  common  law  rule  in  regard  to  constructive 
notice,  inquiry  must  be  made  ;  the  fact  is  constructive  notice, 
if  inquiry  is  not  made  or  not  faithfully  made,  of  whatever  might 
well  have  been  ascertained  concerning  the  power  of  the  trustee 
to  sell  the  instrument  and  use  the  proceeds.^     It   is  clear  that 

'  See  the  language  of  O'Brien,  J.,  in  Cheever  v.  Pittsburgh  R.  Co.,  150  N.  Y. 
69,  65.  This  is  shown  by  language  just  before  used  by  the  same  judge.  '  The 
rights  of  the  holder  are  to  be  determined  by  the  simple  test  of  honesty  and 
good  faith,  and  not  by  the  speculative  issue  as  to  his  diligence  or  negligence.' 
Id.  at  p.  65. 

2  Cheevetr.  Pittsburgh  R.  Co.,  supra.  To  such  a  case  was  the  language  of 
O'Brien,  J.,  to  be  applied.  See  also  Stough  v.  Ponca  Mill  Co.,  54  Neb.  500  ; 
Third  National  Bank  v.  Marine  Lumber  Co.,  44  Minn.  65. 

8  '  He  who  takes  a  security  from  a  trustee,  with  his  fiduciary  character  dis- 
played upon  its  face,  is  to  inquire  as  to  his  right  to  dispose  of  it ;  but  if  on 


238 


BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XVIL 


f^ 


this  would  not  be  true  in  those  States  in  which  cnly  the  limited 
rule  of  constructive  notice  prevails.  The  presence  of  the  word 
'trustee'  would  not  create  suspicion  so  as  to  demand  inquiry  j 
the  custom  (forced  where  the  broad  rule  of  constructive  notice 
prevails)  is  clear  upon  the  point. 

uppose  that  on  the  face  of  the  instrument  there  is  a  state- 
ment of  the  consideration  for  which  the  instrument  was  given, 
Statement  of  something  more,  that  is  to  say,  than  the  usual  '  For 
consideration,  y^lue  received.'  It  is  clear  that  under  either  doc- 
trine of  constructive  notice  a  statement  of  consideration  of  itself 
is  not  enough  to  put  the  purchaser  upon  inquiry  to  see  whether 
it  is  true  or  what  the  truth  may  be.^  There  must  be  more  than 
the  recital  ;  what  the  recital  declares,  indicates,  or  suggests  will 
I  \,'  L  be  the  question.  Thus  even  under  the  broad  rule,  a  recital  upon 
i-^\jn  a  negotiable  promissory  note  that  it  is  given  in  payment  for  rent 
y\fr^  ,^  oAto  become  due  is  no  notice  that  the  title  to  the  land  may  passto 

(iK^twi*      another.'' 

^se^agam  that  an  indorsement  in  the  name  of  a  partner- 
ship is  for  the  accommodation  of  another,  and  is  known  to  be 
Misuse  of  part-  *^^  ^J  ^^^^  transferee.  This  would  be  notice,  under 
nership  name,  either  doctrine,  of  want  of  authority  in  the  partner 
w'ho  made  the  indorsement  ;  for  presumptively  it  is  beyond  the 
objects  of  a  partnership  to  become  a  surety,^  though  of  course  a 
partnership  might  be  formed  for  such  a  purpose. 

inquiry  it  is  found  that  there  is  no  restriction  upon  the  trustee's  power  of 
disposition,  or  (it  may  be  added)  there  is  nothing  in  the  natui-e  of  the  transac- 
tion to  indicate  any  abuse  of  his  trust,  then  the  title  of  the  purchaser  in 
question,  for  vahie  and  before  maturity,  will  be  protected.'  Bank  v.  Looney, 
99  Tenn.  278. 

Such  cases  are  to  be  distinguished  from  cases  in  which  there  is  a  contest 
between  the  purchaser  and  the  cestui  que  trust ;  there  the  rule  is  or  may  be 
still  stronger  in  favor  of  the  cestui  que  trust.  Id.  See  e.  g.  Freeman  i\ 
Bailey,  50  S.  C.  241.  The  text  refers  to  actions  upon  the  negotiable  instru- 
ment.    See  also  Fox  v.  Citizens'  Bank,  35  L.  R.  A.  678,  note. 

1  Ferris  v.  Tavel,  87  Tenn.  390  ;  Bank  v.  JMichael,  96  N.  C.  53  ;  Buchanan 
V.  Wren,  10  Texas  Civ.  Ap.  560  ;  Fant  v.  Wickes,  id.  394  ;  Beatty  v.  Western 
College,  177  111.  280  (' for  erection  of  boarding  hall'). 

^  Buchanan  v.  Wren,  supra. 

3  Smith  V.  Weston,  159  N.  Y.  194;  Stall  v.  Catskill  Baidt,  18  Weud. 
466. 


Sect.  2.]  EQUITIES.  239 

Plainly  it  would  not  be  enough  under  either  doctrine  of  con- 
structive  notice    that  the   facts  of  which    the   holder  is   aware 
involve  only  a  possible   or  potential   equity.     For  Potentia0^-«^  uXAAHf^^^ 
example:   The  plaintiffs  are  indorsees,  and  the  de-  eq"''-^A^X«/y*''V^i< A 
ff  ndants  acceptors,  of  a  bill  of  exchange  now  sued  upon.    When'j^^*'**^   ^^ 
the    plaintiffs    took    the    bill    they  were    informed   that  it  was *--*^**''**^ 
accepted  in  part  payment  of  the  price  of  a  brig,  which  by  the  ^(^  £m.a>^^ 
bargain  was   to   be  put  in   repair  and   made  seaworthy.     This  y^uty\jt>0^i^^ 
agreement   had  been  broken,  but  of  that  fact  the  plaintiffs  ^^^d /^  lK#^2^f4 
no    information   or  knowledge.      The   plaintiffs   are   entitled  to^  ^jj-    l^^r^ 
recover  ;  they  were  not  bound  to  inquire  whether  the  agreement' .     , 
for  repairs  had  been   performed.^     Again:    The  plaintiff  is  in-  ^  ^ 

dorsee,  and  the  defendant  acceptor,  of  a  bill  of  exchange  sued*^^.^/'*^*' 
upon.  The  acceptance  was  in  consideration  of  a  promise  by  iheiSd.4/^**-^ (i 
drawer,  made  known  to  the  plaintiff,  to  send  to  the  acceptor  six^^  ^  t/P/f 
hundred  bushels  of  wheat  at  the  opening  of  navigation  there-  y^^  £a_,nTi 

after;  which  promise,  performable  before  the  bill  became  due,  y        , _ 

was  not  kept.     The  plaintiff  was  not  bound  to  inquire  whether  /^ 

the  promise  had  been  kept,  and  not  knowing  of  the  default,  i^^M/vt  *4/V 

entitled  to  recover.^  \v^^^ 

Such  cases  are  free  from  serious  question.  But  it  will  be>-M»- 
diflficult  sometimes  to  determine  whether  the  facts  constitute 
constructive  notice  or  not,  under  either  doctrine.  Suppose  for 
instance  that  a  purchaser  of  a  negotiable  promissory  note  before 
maturity  has  knowledge  that  instalments  of  interest  are  overdue  ; 
is  this  constructive  notice  of  the  existence  of  equities,  assuming 
that  equities  exist  ?  The  authorities  even  under  the  narrow 
doctrine  of  constructive  notice  are  not  agreed.'  But  the  better 
rule  appears  to  be  that  it  is  not  notice. 

1  Davis  V.  McCready,  17  N.  Y.  230. 

2  Cameron  v.  C'happell,  24  Wend.  94.  It  is  conceived  that  these  cases 
would  be  accej)ted  where  the  broad  rule  of  constructive  notice  obtains.  Bank 
V.  Penland,  101  Tenn.  445.  See  also  Blue  Springs  Mining  Co.  v.  Mcllvien, 
97  Tenn.  225  ;  Bank  v.  Stockell,  92  Tenn.  252.  Nor  would  inadequacy 
if  not  gross  be  notice  of  equities  under  either  doctrine.  Oppenheimer  v. 
Bank,  97  Tenn.  19.  So  'as  advised.'  American  Bank  v.  Oluck,  68  Minn. 
129. 

8  That  it  is  notice,  First  ISTational  Bank  v.  Forsyth,  67  l\Iinii.  267  (on  rnerf* 
authority,   it  seems);    Newell  r.  Gregg,  51   Barb.  263:    Cliouteau  v.  Allen, 


240      ^^^**'*^'^L^^OTES,  A^yP   CHEQUES.         [Chaf.  XVIL 

Between  knowledge  and  absolute  notice  ^  equities  ^  tnere^->»^  cTW 
appears  to  be  no  difference  in  legal  effect  ;  either  of  itself  willr*-KAy^ 
Knowledge  and  prevent  one  from  being,  on  one's  own  title,  a  bona 
absolute  notice,  g^^  holder.  So  far  as  it  may  be  heljiful  to  distin- 
guish between  the  two,  one  may  be  said  to  have  knowledge 
of  what  one  may  testify'  to  in  court  directly  as  a  fact,  including 
what  one  cannot  testify  to  only  because  of  some  reason  of  a 
personal  or  peculiar  nature  (e.  g.  what  has  passed  between  hus- 
band and  wife  or  between  persons  in  any  other  confidential 
relation  creating  privilege) ;  while  absolute  notice  may  be  said 
to  consist  (1)  in  specific  information  of  an  equity  itself  as  distin- 
guished from  knowledge  of  facts  leading  to  an  equity;  (2)  in 
some  statutory  declaration;  or  (3)  in  some  positive  doctrine  of 
the  law  merchant. 

By  '  information  '  in  the  first  mode  is  meant  what  is  heard  or 
read,  or  learned  from  another,  as  distinguished  from  knowledge; 
'  Information '  of  which  the  common  poster  '  Notice  '  or  '  Take 
of  equity,  Notice'  is  a  good  example.     And  this  information 

must  purport  to  be  of  the  actual  existence  of  an  equity  ;  other- 
wise it  would  at  most  be  only  a  putting  upon  inquiry,  already 
disposed  of.  Thus  an  indorsement  bears  the  words  '  For  col- 
lection '  or  '  For  account  of.'  This  is  '  information '  that  the 
indorsee  is  a  special  agent  of  the  indorser ;  that  is,  that  the 
latter  has  not  parted  with  his  title. ^ 

Of  '  statutory  declaration, '  all  that  need  be  said  is  that  the 
legislature  may  make  the  performance  of  any  act  to  be  done  in 
a  public  way,  such  as  the  registration  of  an  instrument,  absolute 
notice  of  its  existence  and  contents. 

70  Mo.  290,  339.  Contra,  National  Bank  v.  Kirby,  108  Mass.  497 ;  Cromwell 
V.  Sac  County,  96  U.  S.  51  ;  Kelley  r.  Whitney,  45  Wis.  110  ;  State  v.  Cobb, 
64  Ala.  127  ;  Brooks  v.  Mitchell,  9  M.  &  W.  15. 

1  Notice  of  dishonor  is  a  different  thing  from  knowledge  of  it.  See  ante, 
pp.  133,  134,  142  etseq. 

2  United  States  Bank  v.  Geer,  55  Neb.  462  (overrnling  53  Neb.  67,  that 
such  indorsement  is  ambiguous  and  hence  controllable  by  evidence)  ;  Bayer 
V.  Richardson,  53  Neb.  156  ;  Freeman's  Bank  i;.  National  Tube  Works,  151 
Mass.  413;  Leary  v.  Blanchard,  48  Maine,  269;  Blaine  v.  Bourne,  11  R.  I. 
119  ;  Armour  Banking  Co.  v.  Riley  Bank,  30  Kans.  163. 


Sjcct.  3.]  EQUITIE^S.  241 

The  third  mode,   ^positive   doctrine^of   the   law  merchant,' 
refers  to  cases  in  which  there  has  been,   or  may  have  been,  no 
information  of  the  existence  of  any  particular  equity  Taking  after 
or  of  any  equity  at  all.     The  one  typical  case,  if  "'*'^^"^>'' 
not  the  only   case,    of  the   kind  is   the  taking  of  a  negotiable 
instrument  after  maturity ;   that  is  positive  notice  of  any  equity    (/-vi^^V  C^^ 
whatever  which  niav  theii  exist  against  th^e   holder.     The  only  ^^^,^,^^,^7^ 


question,  then,   is  whetner  the  instrument  was  taken  after  its  (j^^TTr 
maturity.     One   or   two  points  may  be  noticed.     To   take   an  -J,,~Tl 


ity.     One   or   two  points  may   be  noticed,     io   take   an  -MMg,J»mT7i 
instrument  entitled  to  grace  on  the  last  day  of  grace  is  not  to  ^  ^^ 

take  it  after  maturity;  at  least,  if  it  was  taken  within  business  J__f. t_/ 
hours  of  that  day,  being  paper  payable  at  a  place  having  ^^"^^iOL  , 
established  hours  of  business.^  Maturity  lasts  until  the  latest  ^^'***'  "^ 
moment  for  making  payment  according  to  the  terms  of  the  con-  ir%dt*4  P^ 
tract.  On  the  other  hand,  to  take  a  cheque  long  after  its  date <^'h^j,Mjik^ 
has  well  been  held  as  taking  it  with  prima  facie  indication  that^c^y^  ihts. 
it  has  been  dishonored;  that  is,  that  it  is  overdue.^  The  date<3i£^5i^..^^, 
of  an  instrument,  however,  is  only  presumptive  evidence  of  the  ^jti^.~l$OEt^ 
time  when  it  was  issued;  it  may  have  been  delivered  long  after- ^^-^r^'^UCjCL 
wards  (or  before),  and  it  becomes  a  valid  undertaking  ^^Y £Kp[xL  /0U^ 
from  its  delivpry.'  * — -p — 

§  3.     Holder  for  Value.  9^/ 

The  term  'holder  for  value,'  the  complement  of  'bona  fide  ,71^ /^^./c^^ 
holder,'  means,  properly  speaking,  a  holder  who  has  taken  the/     j' — ^^  ^ 
paper     upon    a    valuable     consideration,    and    has  w      .       ,4^   *"/ — — X-*' 
thereby  acquired  the  title  to  it*  according  to  the   '  value '  as  atV^Jj^yJ 

law  merchant.  '^^'^^^^  ^''^ ^fnOE^^^ 

The  term  '  valuable  consideration  '  is,  of  course,  borrowed  by^T^  '^  *^ 
the  law  merchant  from  the  common  law,  or  rather  has  been  im-  P'^'tJUt^d^ 

1  Farrell  v.  Lovett,  68  Maine,  326  ;  Crosby  v.  Grant,  36  N.  H.  273.  «jrip|^-««^ 

2  Cowing  V.  Altman,  71  N.  Y.  435. 

*  Id.  ;  N.  I.  L.  §  23.  An  undated  instrument  is  treated  as  dated  of  the 
time  when  it  was  issued.  N.  I.  L.  §  24,  3.  In  such  a  case,  if  the  instrument 
is  payable  at  a  fixed  time  after  date,  or  after  sight  in  the  case  of  a  bill,  any 
holder  may  insert  the  true  date,  and  the  instrument  will  be  payable  accord- 
ingly. Id.  §  20.  If  the  instrument  be  postdated  and  payable  at  a  future 
time,  the  time  will  be  reckoned  accordingly,  regardless  of  the  day  of  delivery 

*  N.  I.  L.  §  2,  word  '  value." 

10 

U:^U^  {Hi^^  c^iT^.  £,^^Mf  ^^L..uDi4^  R.a^ 


242  BILLS,  NOTES,  AND  CHEQUES.         [Chap.  XVIt 

posed  upon  the  law  merchant,^  and  has  the  same  meaning  which 
it  bears  in  the  law  of  contract  generally;^  though  its  meaning 
has  perhaps  been  pushed  further,  by  the  needs  of  business,  in  the 
law  mercliant  than  elsewliere.  The  consideration  must  be  val- 
uable; it  is  not  enough  that  it  is  merely  'valid,'  'good,'  or 
'  meritorious,'  so  as  to  convey  the  title,  as  in  the  case  of  gift." 
All  the  authorities  agree  in  that  proposition.  It  may  be,  in- 
deed, that  one  to  whom  a  negotiable  instrument  has  been  given 
can  recover  upon  it;  but  that  will  be  because  the  giver,  or  some 
prior  liolder,  had  a  right  of  action  upon  it,  and  not  because  the 
present  owner  is  himself  a  holder  for  value. 

Valuable  consideration  consists  in  some  legal  right,  by  way 
of  interest,  profit,  or  be7iefit,  accruing  to  the  one  party,  or  some 
Whatconsti-  ^oss  of  legal  right,  by  way  of  forbearance,  dam- 
tutes  value.  g^gg^  qj.  (detriment  suffered  by  the  other.*  It  is  not 
necessary  that  there  should  be  '  quid  pro  quo, '  or  benefit  of  any 
kind,  to  make  one  a  holder  for  value;  detriment  (in  respect  of 
legal  right)  is  enough.*  That  may  be  shown  by  the  case  of 
accommodation  paper,  already  considered;  the  accommodation 
party  has  no  benefit,  or  may  have  none,  from  the  transaction, 
but  he  is  bound  towards  one  who  takes  the  paper  foF value;  that 
is,  who  parts  with  something  of  value,  and  so  suffers  detriment 
for  the  time.  That  that  is  a  doctrine  of  contract  in  general  may 
be  shown  by  the  following  illustration  :  If  A  mortgage  his  land 


1  See  ante,  pp.  3,  8. 

2  Id.   §  32 :  '  Value  is  any  consideration  suffieient  to  support  a   simple 

contract.' 

8  Thus  love  and  affection  are  not  a  valuable  consideration  in  the  law  mer- 
chant any  more  than  by  the  common  law.  Kern's  Estate,  171  Penn.  St.  5.5. 
Delivery  of  a  promissory  note  as  a  gift  is  not  an  executed  gift  of  the  money, 
but  revocable  and  revoked  by  the  death  of  the  maker  before  payment..  Id.  ; 
School  District  v.  Sheidley,  138  Mo.  672.  What  amounts  to  a  delivery  of  the 
note  so  as  merely  to  vest  title  in  the  donee  see  Jennings  v.  Neville,  180  111. 
270  ;  Taylor  v.  Harmison,  179  111.  137.  These  are  cases  of  'good'  considera- 
tion as  distinguished  from  '  valuable.' 

*  Currie  v.  Nind,  L.  E.  10  Ex.  162.  Note  that  it  is  legal  right,  whether 
benefit  or  detriment. 

*  Alabama  Bauk  v.  River.s,  116  Ala.  1. 


Sect.  3.]  EQUITIES.  243 

to  B,  to  secure  B  in  lending  money  to  C,   B  is  a  purchaser  for 
valuable  consideration,  though  A  may  have  no  benefit  at  all.^ 

While,  however,  the  authorities  agree  upon  the  definition, 
those  relating  to  the  unwritten  law  merchant  do  not  agree  in 
its  application.  The  courts  of  this  country  are  conflict  of 
divided  on  the  unwritten  law  upon  the  question  of  authority, 
the  effect  of  transfers  of  paper  for  security  ;  and  that  makes 
about  the  only  question  touching  valuable  consideration  which 
calls  for  special  remark  in  a  work  like  this ;  most  other  ques- 
tions of  consideration  can  be  answered,  in  view  of  what  has 
already  been  said,  by  the  law  of  contracts  in  general.  The 
particular  point  of  difticulty  is  whether  the  mere  taking  of  a 
negotiable  instrument  by  a  creditor  from  his  debtor,  as  security 
for  or  in  conditional  payment  of  a  pre-existing  debt,  but  with 
full  title,  constitutes  the  taker  a  holder  for  value. 

Such  a  case  seems  at  first,  looking  at  it  from  the  common  law 
point  of  view,  one  merely  of  so-called  *  valid '  consideration, 
operative  indeed  between  the  debtor  and  his  creditor,  so  as  to 
enable  the  creditor  to  hold  the  instrument  against  his  debtor, 
but  wanting  in  value,  and  hence  failing  to  make  the  creditor  a 
holder  for  value.  And  so  not  a  few  courts  in  the  United  States, 
following  the  lead  of  the  courts  of  New  York,  hold.  For  exam- 
ple :  The  plaintiff,  suing  in  equity,  being  owner  of  a  vessel, 
employs  the  defendants,  A  and  B,  to  sell  her  on  credit,  taking 
good  notes  in  payment  to  be  transmitted  to  him.  A  and.B  sell 
the  vessel  and  take  notes  of  the  purchasers,  payable  to  certain 
persons,  and  duly  indorsed.  Instead  of  delivering  the  paper  to 
the  seller  of  the  ship,  A  and  B  now  deliver  the  said  notes  to  C 
and  D,  co-defendants  in  the  case,  who  are  under  heavy  responsi- 
bility for  A  and  B  as  accommodation  indorsers  for  them  of  paper 
not  yet  due,  which  paper  C  and  J)  are  at  a  later  time  obliged  to 
pay.  C  and  D  know  nothing  of  the  circumstances  under  which 
A  and  B  became  possessed  of  the  notes,  and  believe  them  to  be 
the  rightful  property  of  A  and  B;  and  they  receive  the  notes  as 
security  for   the   responsibility    which   they  had   incurred,    and 

1  Ex  parte  Hearne,  1  Buck,  165 ;  Marden  v.  Babcock,  2  Met.  9i»  ;    Bigeiow, 
Fraud,  ii.  444. 


'244  BILLS,  NOTES,   AND   CHEQUES.         [Chap.  XVII. 

three  days  afterwards  dispose  of  some  of  them  for  ca.sh,  before 
becoming  aware  of  the  plaintiffs'  rights.  The  pkiintiffs  are 
deemed  entitled  to  the  notes  or  their  proceeds,  the  defendants 
not  having  taken  them  for  valuable  consideration.^  Again  : 
The  plaintiff,  suing  in  trover,  alleges  that  the  defendant  has 
converted  to  his  own  use  two  promissory  notes.  The  defendant 
came  thus  by  the  notes :  A  and  B,  being  in  debt  to  the  defend- 
ant on  a  certain  note  which  they  could  not  pay,  prevail  upon 
the  defendant  to  withdraw  it  from  the  hands  of  a  collecting 
bank  by  delivering  to  him  the  two  notes  in  question  as  security, 
in  fraud  of  the  rights  of  the  plaintiff,  the  owner,  the  defendant 
promising  to  pay  the  overdue  note  in  a  short  time.  There  has 
been  no  agreement,  however,  to  forbear  suit  thereon.  A  and  B 
stop  payment  and  fail,  without  paying  their  debt  to  the  defend- 
ant; and  the  defendant  receives  payment  of  the  two  notes.  The 
})laintiff  is  deemed  entitled  to  recover,  the  defendant  not  having 
taken  the  notes  for  value,  the  debt  to  secure  which  they  were 
taken  being  wholly  a  pre-existing  debt.^ 

Between  the  cases  which  make  these  two  examples,  a  question 
similar  in  effect,  at  least  as  treated  by  the  court,  went  to  the 
Supreme  Court  of  the  United  States,  and  that  court  took  the 
contrary  view ;  and  the  decision  has  had  a  large  following, 
larger  probably  than  that  of  the  courts  of  New  York. 

According  to  the  Federal  Court  and  its  following,  the  creditor, 
taking  full  title  though  only  as  security  or  conditional  payment, 
takes  for  value,  notwithstanding  the  fact  that  the  debt  for  which 
the  paper  was  taken  was  a  pre-existing  debt  in  no  respect  then 

1  Bay  V.  Coddington,  5  Johns.  Ch.  54  ;  affirmed,  20  Johns.  637.  This  is 
the  leading  case  on  that  side  of  the  question. 

'  Stalker  v.  McDonald,  6  Hill,  93,  affirming  Bay  v.  Coddington,  on  review 
of  the  intervening  authorities  inchiding  Swift  v.  Tyson,  16  Peters,  1,  to  the 
contrary.  See  also  to  the  same  effect  of  paper  taken  as  security  or  in  con- 
ditional payment  for  prior  debt,  Martin  v.  Bank,  94  Tenn.  176;  Loewen  v. 
Forsee,  137  Mo.  29  ;  Keokuk  Bank  v.  Hall,  106  Iowa,  540  ;  Comstock  v.  Hier, 
78  N.  Y.  269  ;  Royer  v.  Keystone  Bank,  83  Penn.  St.  248  ;  Cummings  v. 
Boyd,  id.  372  ;  Bardsley  v.  Delp,  88  Penn.  St.  420  ;  Fenouille  v.  Hamilton, 
35  Ala.  322  ;  Lee  v.  Smead,  1  Met.  (Ky.)  628  ;  May  v.  Quimby,  3  Bush,  96  ; 
King  V.  Doolittle,  1  Head,  77  ;  Bertrand  v.  Barkman,  13  Ark.  150  ;  Rox- 
borough  V.  Messick,  6  Ohio  St.  448  ;  Nutter  v.  Stover,  48  Maine,  163. 


Sect.  3  ]  EQUITIES.  245- 

created.^  For  example :  The  plaintiff  is  indorsee,  and  the  de- 
fendant acceptor,  of  a  bill  of  exchange  sued  upon.  The  plaintiff 
took  the  bill  before  it  became  due,  in  good  faith,  in  payment  of 
a  promissory  note  due  to  him  by  A  and  B,  drawers  of  the  bill, 
the  plaintiff  fully  believing  the  bill  to  be  justly  due.  The  bill 
had  been  accepted  in  part  payment  of  lands  sold  by  A  and  1> 
under  false  and  fraudulent  representations  by  them.  The  plain- 
tiff is  a  holder  for  value,  though  the  debt  was  pre-existing  en- 
tirely, and  being  also  a  bona  fide  holder  he  is  entitled  to  recover; 
the  case  being  treated  by  the  court  as  if  the  plaintiff  had  taken 
the  bill  to  secure  payment  of  the  pre-existing  debt.*  Again  :  The 
j)laintiffs  are  indorsees,  and  the  defendant  is  maker,  of  a  promis- 
sory note  now  sued  upon.  The  defendant  made  the  note,  with- 
out consideration,  for  the  accommodation  of  the  payee.  The 
payee  delivers  the  note  indorsed  by  himself  to  A,  without  con- 
sideration, for  the  purpose  of  having  it  discounted  for  the  pa^'ee's 
benefit.  Instead  of  procuring  the  note  to  be  discounted,  A 
]»ledges  it  to  the  plaintiffs  as  collateral  security  for  a  (smaller) 
pre-existing  debt  due  by  A  to  them.  The  plaintiffs  take  the  note 
without  knowledge  of  the  facts  here  stated.  They  are  holders 
for  value,  and  are  entitled  to  recover  to  the  extent  of  the  debt 
due  to  them  by  A.' 

1  Brooklyn  R.  Co.  v.  National  Bank,  102  U.  S.  14  ;  People's  Bank  v.  Clay- 
ton, 66  Vt.  541  ;  Merchants'  Ins.  Co.  v.  Abbott,  131  Mass.  397,  400 ;  Stevens  ». 
Hlanchard,  3  Cush.  162,  169  ;  Le  Breton  v.  Pierce,  2  Allen,  8, 14  ;  Bank  of  Re- 
public V.  Carrington,  5  R.  I.  515  ;  First  National  Bank  v.  McAllister,  46  Mich. 
397  ;  Dyer  v.  Rosenthal,  45  Mich.  588  ;  Beuerman  v.  Van  Buren,  44  Mich. 
496  ;  Reddick  i'.  Jones,  6  Ired.  107  ;  Gibson  v.  Connor,  3  Kelly,  47  ;  Vaiette 
V.  Mason,  1  Smith  (Ind.),89;  Turner  v.  Killian,  12  Neb.  580  ;  Currier.  Misa, 
L.  R.  10  Ex.  153;  Percival  v.  Frarapton,  2  Cromp.  M.  &  R.  180  ;  Peacock  »•. 
Purcell,  1 4  C.  B.  X.  s.  728 ;  Taylor  v.  Blakelock,  32  Ch.  Div.  560.  Some  of 
these  are  the  still  stronger  cases  of  pioperty  transferred  to  the  creditor.  See 
Bigelow,  Fraud,  ii.  459  et  seq. 

2  Swift  V.  Tyson,  6  Peters,  1  ;  Cases,  300.  The  report  of  the  case  states 
that  the  bill  was  taken  in  'payment,'  but  the  majority  (there  was  a  dissenting 
opinion)  put  the  case  on  the  footing  of  paper  taken  in  security  of  a  prior  debt, 
and  treat  the  taking  in  either  way  as  a  taking  for  value.  Of  course  that  was 
not  necessary  to  the  decision  of  the  case,  but  the  opinion  was  deliberately 
expressed,  and  it  has  been  accordingly  taken  as  authority  for  the  doctrine 
expressed. 

8  Fisher  v.  Fisher,  98  Mass.  303. 


246  BILLS,  NOTES,  AND   CHEQUES.         [Ciivi-.  XVIL 

The  doctrine  thus  laid  down  is  the  doctrine  of  the  courts  of 
England  and  of  many  of  the  courts  of  this  country,  and  it 
The  better  appears  to  be  sound-  Even  on  strict  common  law 
view.  doctrine,  it  does  not  follow  from  the  fact  that  the 

debt  to  secure  which  the  paper  was  taken  was  wholly  pre-existing, 
and  that  there  was  no  agreement  for  forbearance,  or  other  factor 
in  the  case  besides  the  transfer  of  title  by  the  debtor  to  the 
creditor,  that  the  creditor  has  not  taken  the  paper  for  valuable 
consideration.       Detriment   to   the   creditor   creates   a   valuable 
consideration;  and  detriment  arises  wherever  the  party  assumes 
by  the  transaction  burdens  or  duties  not  resting  upon  him  be- 
fore, the  failing  to  bear  or  perform  which  will  result  in  loss  or 
in  diminution  of  his  debt.     And  such  is  the  situation  in  ques- 
tion.    The  creditor  takes  from  his  debtor  a  negotiable  security  ; 
perhaps  there  are  parties  to  it  liable  conditionally  only,  on  the 
taking  of  certain  steps.     The  holder  takes  the  security  upon  the 
implied  condition  or  undertaking  to  perform  the  duties  involved, 
on  pain,  in  case  of  failure,  of  losing  the  debt  secured  or  having 
it  cut  down  to  the  extent  of  the  loss  caused  to  his  debtor  by  his 
own  failure  of  duty.^     But  it  does  not  matter  whether  there  are 
parties  conditionally  liable  or  not ;  in  any  event  the  holder  takes 
the  security  upon  the  implied  condition  or  undertaking  that  he 
will   exercise  diligence  in  collecting  the  money  out  of  it  and 
applying   it   upon  the  debt,  on  pain,  in  case  of  failure   so   to 
act,  of  discharging  the  debt  to  the  extent  of  the  loss  sustained. 
All  that  involves,  when  the  collateral  is  taken,  —  and  that  is 
the  moment  to  be   considered,  —  indefinite   detriment   to   legal 
right,  the  possibility  of  having  to  sue  with  the  trouble  and  ex- 
pense incident,  among  other  things.     That  clearly  makes  him 
a  holder  for  value.     The  Statute,  beginning  with  New  York, 
also  so  declares;  ' an  antecedent  or  pre-existing  debt  constitutes_ 
value.'  ^ 

~  But  it  is  conceived  to  be  wrong  to  look  at  the  case  from  the 
point  of  view  of  the  common  law.     The  question  is  one  of  law 

1  Peacock  i-.  Purcell,  14  C.  B.  K.  s.  728. 
f       2  N.  L  L.  §  32:   'An  antecedent  or  pre-existing  debt  constitutes  value, 
and  is  deemed  such  whether  the  instrument  is  payable  on  demand  or  at  a 
future  time.' 


Seci.  3.J  EQUITIES.  247 

raerchaiit,  which  stands  upon  a  footing  of  its  own,   to  wit,  cua- 

.  torn  ;  and  hence  whether  there  has  been  a  valuable  „^    ^  ^^^ 

consideration  according  to  the  common  law  or  not  basis  of  doc- 

rm        .  ,  •  •        trine. 

IS  an   irrelevant  question,      llie  true  question   is, 

What  is  the  custom  of  merchants  ?  No  rule  touching  the  law 
merchant  can  permanently  hold  place  which  fetters  or  is  opposed 
to  custom  ;  for  it  must  rest  upon  essentially  unsound  theory. 

Now  transfer  by  a  debtor  to  his  creditor  of  a  negotiable  in- 
strument, to  pay  or  only  to  secure  a  prior  debt,  makes  the  cred- 
itor a  holder  for  value  by  the  custom.  A  debtor  is  justified  so 
long  as  the  debt  lasts  in  making  his  creditor  secure.  The 
debtor's  obligation  to  pay  is  an  obligation  which  his  property 
sooner  or  later  must  satisfy  ;  and  he  is  as  much  justified  in 
putting  his  property  —  enough  of  it  for  the  purpose  —  into  his 
creditor's  hands  for  security  at  the  time  of  creating  the  debt,  or 
afterwards,  as  well  as  by  payment. 

The  situation  is  different  where  the  security  was  passed  to 
the  creditor  as  a  mere  agent  or  bailee ;  such  a  distinction  has 
well  been  taken. ^  The  debtor  himself  in  such  a  case  is  to  be 
considered  still  as  the  real  holder,  for  he  can  withdraw  the  se- 
curity at  will ;  the  creditor,  therefore,  though  having  the  secur- 
.ity  in  his  hands,  is  not  in  the  legal  sense  the  holder.  Hence 
we  have  put  the  case  as  security  transferred  by  the  debtor  to  his 
creditor  'with  full  title,' though  still  as  security.  The  situa- 
'tion  of  a  trustee  or  assignee  may  also  be  excepted  ;  such  a  per- 
'  son,  though  in  virtue  of  his  office  a  party  with  full  title,  and 
"bound  to  perform  certain  duties,  is  by  the  current  of  authority 
treated  as  standing  in  the  position  of  him  from  whom  he  re- 
ceived the  instrument.  He  is  not,  according  to  the  current 
of  authority,  a  holder  for  value  in  mere  virtue  of  his  office  of 
trustee  or  assignee.^ 

1  See  Austin  v.  Curtis,  31  Vt.  64  ;  Gates  v.  First  National  Bank,  100 
,U..  S.  239  ;  Bigelow's  L.  C.  Bills  and  Notes,  499,  500,  503. 

2  Swan  V.  Crafts,  124  Mass.  453  ;  Holland  v.-  Cruft,  20  Pick.  321,  338 ; 
Palmer  v.  Thayer,  28  Conn.  238;  Loos  v.  Wilkinson,  110  N.  Y.  195  ;  s.  c. 
113  N.  Y.  485  ;  Putnam  v.  Hubbell,  42  N.  Y.  106,  114  ;  Farrington  v.  Sex- 
ton, 43  Mich.  454;  Main  v.  Lynch,  54  Md.  658  ;  Eigenbrun  v.  Smith,  98 
¥.  C.  207.     But  see  Sipe  v.  Eannan,  26  Gratt.  563  ;  Olendorfer  v.  Myer,  88 


248 


BILLS,  NOTES,  AND   CHEQUES.         [Chap.  XVri. 


It  is  admitted,  even  under  the  New  York  doctrine,  that  the 
holder  of  paper  taken  as  collateral  security  for  a  pre-existing 
debt  is  a  holder  for  value  against  an  accommodation  party  to  the 
security.^     That  is  a  concession,  .so  far,  to  the  better  doctrine. 

The  groimcTof  the  aoctrme  that  transfer  to  a  creditor  imports 
value  stands,  it  will  be  seen,  without  regard  to  the  question 
Agreement  to  whether  there  has  been  any  undertaking,  express 
forbear.  ^j^.    implied,    for    forbearance    by    the    creditor ;  it 

stands,  indeed,  though  it  be  plainly  understood  that  there  is 
no  agreement  for  forbearance.  If,  however,  there  be  an  agree- 
ment, express  or  implied,  to  forbear,  the  case  is  by  so  much 
strengthened  ;  and  all  the  authorities,  those  of  the  unwritten 
New  York  rule  as  well  as  the  rest,  agree  that  the  creditor  in 
such  a  case  is  a  holder  for  value. •^  And  such  an  agreement  is 
deemed  to  be  implied  in  a  great  many  cases. ^  Whether  an  im- 
plication of  the  kind  arises  depends  somewhat  upon  the  question 
whether  the  instrument  taken  as  security  is  for  the  same  amount 
as  the  original  debt,*  or  for  a  different  sum,  more  or  less.  Tf 
the  new  security  is  for  the  same  sum  as  the  original  debt,  and 
is  payable  on  time,  there  is  a  strong  implication  that  the  cred- 
itor agrees  to  forbear  suit  until  the  maturity  of  such  security. 
And  a  like  implication  springs  up  where  the  new  security  is  for 
a  larger  sum  than  the  old  debt.® 

Va.  384;  Byrne  v.  Becker,  49  Mo.  548;  Wilson  v.  EiHer,  7  Cold.  31.  Of 
course  an  assignee  or  a  trustee  may  he  a  holder  for  value,  for  he  may  be  a 
creditor  or  he  may  have  parted  with  something  of  special  value  ;  but  in  his 
office  merely  he  will  take  subject  to  equities,  by  the  better  rule.  See  Bige- 
low,  Fraud,  it.  pp.  450-456. 

1  Grocers'  Bank  v.  Penfield,  69  N.  Y.  502 ;  Maitland  v.  Citizens'  Bank, 
40  Md.  540. 

2  See  Pratt  v.  Conan,  37  N.  Y.  440  ;  Moore  t'.  Ryler,  65  N.  Y.  438,  442  ; 
Burns  i'.  Rowland,  40  Barb.  368  ;  Oates  v.  First  National  Bank,  100  (I.  S. 
239. 

3  See  e.  g.  Stuart  v.  Lancaster,  84  Va.  772  ;  Blair  v.  Hoge,  28  Gratt.  165, 
171.  ^ 

*  Michigan  Bjink\i;.  Leave«A\'orth,  28  Vt.  209. 

*  Atkinson  y.  Brobks,  2*6  Vt.  569.  It  should  be  observed  that  it  is  agrM- 
ment  for  forbearance  which  is  spoken  of  ;  mere  forbearance  does  not  affect  tba 
case.  / 


Sect.  3.]  EQUITIES.  249 

It  is  clear,  too,  that  if  the  creditor  parts  in  any  other  way 
with  any  right,  his  claim  as  a  holder  for  value  is  still  further 
strengtliened.^  Thus,  the  plaintiff  is  everywhere  a  partine  with 
holder  for  value  when  he  has  parted  with  the  de-  ""'ght. 
fendant's  note,  upon  receiving  from  him  a  new  note,  indorsed 
by  a  third  person,^  or  where  the  new  security  is  transferred  to 
the  creditor  upon  his  giving  up  an  overdue  note,*  or  where  tha 
creditor  receives  the  new  security  for  the  repayment  of  a  loan  of 
money  upon  another  instrument,^  or  where  he  receives  it  on  ac- 
count of  the  discontinuance  of  proceedings  in  execution  against 
one  of  the  parties  to  it  and  as  security  for  the  payment  of  the 
judgment  in  that  case.^ 

Some  authorities  have  professed  to  make  a  distinction  between 
paper  taken  in  conditional  payment,  and  paper  taken  as  collat- 
eral securitj',  treating  the  holder  as   a  holder  for   _ 
value,  if  he  took  in  the  first  way,  but  not  if  he  took  payment  and 
in   the  second  ;  ®  but   the    distinction   is   not  well 
taken,   and  has  not  found  much  favor. 

It  has  generally  been  agreed  that  if  the  creditor  received  the 
paper  in  absolute  payment  or  satisfaction  of  the  debt,  he  is  a 
holder  for  value.^     But  so  unusual  are  cases  of  that  ^ 

Instrument  re- 

kind  that  it  apjiears  to  be  required  in  some  States  ceived  as  pay- 
that  an  express  agreement  should  be  shown  to  es- 
tablish the  fact  that  the  paper  was  so  taken. ^     That,  however, 
in  so  far  as  it  means  an  agreement  formulated  in  terms,  is  con- 

1  Weaver  v.  Barden,  49  N.  Y.  286,  293  ;  Youngs  v.  Lee,  12  N.  Y.  551 ; 
Essex  Bank  t;.  Russell,  29  N.  Y.  673. 

*  Youngs  V.  Lee,  supra. 

8  Brown  v.  Leavitt,  31  N.  Y.  113. 

*  Bank  of  New  York  v.  Vanderhorst,  32  N.  Y.  553. 

5  Boyd  V.  Cummings,  17  N.  Y.  101. 

6  Fletcher  v.  Chase,  16  N.  H.  38;  Rice  v.  Raitt,  17  N.  H.  116;  Nutter 
i;.  Stover,  48  Maine,  163;  Austin  v.  Curtis,  31  Vt.  64  (overruling  Atkin.sou 
V. .  Brooks,  26  Vt.  569,  and  Michigan  Bank  v.  Leavenworth,  28  Vt.  209) ; 
Ryan  v.  Chew,  13  Iowa,  589. 

7  Seymour  v.  Wilson,  19  N.  Y.  417  ;  Weaver  v.  Barden,  49  N.  Y.  286, 
294. 

*  Brown  i'.  Olmsted,  50  Cal.  162  ;  Tobey  v.  Barber,  5  Johns.  68;  James  v. 
Hackley,  16  Johns.  273.     See  Peters  v.  Beverly,  16  Peters,  532,  562. 


^^itA^^rt^ 


<*-*^^  ^r,4f*%^ 


/  -  2^0^^^    '  ^  BILLS,  NOTES,  AND   CHEQUES.         [Chap.  XVIT 

-  ^^^I^^^trary  to  the  analogies  of  the  law,  and  the  better  authorities  con- 
ij%4(^'  /^~si Jer  that  sufficient  evidence  of. any  kind,  otherwise  proper,  that 
the  parties  meant  the  transfer  to  operate  as  payment,  may  be 
received.^ 
-.  As  for  paper  taken  to  secure  a  debt  created  at  the  same  time, 

5l^  fX^  there  can  be  no  place  ordinarily  for  question  ;  the  creditor  has 
Instrument  always  been  deemed  a  holder  for  value  by  all  tlie 
Ifv  for'Xbt'^"'^'  authorities. 2  So  too  where  any  new  credit  or  in- 
then  created.  dulgence  is  given  upon  the  faith  of  the  new  paper, 
that  jiaper  is  held  for  value.^  Still  even  in  such  cases  the  situa- 
tion will  be  changed  if  the  security  is  not  passed  at  the  time  to 
the  credit  of  the  creditor,  but  is  only  to  be  applied  by  him 
when  paid,  he  in  the  meantime  holding  it  only  as  agent  of  the 
debtor  ;  for  then,   as  we  have  already  said,  the  debtor  is  the 


real  holder. 


§4. 


Equities  :  How  Shown  :  Their  Nature. 


The  cardinal  rul 

holder  for  value  tak 

been  e 

Equities  cut  off. 


f, 


cuts    o 


whom  th6  paper,  if 


^e  have  now  reached  is   that  a  bona  fide 
ee  from  equities,  or  as   it  has  already 
led,  purchase  for  value  without  notice 
ies.      It^makes  no  difference  from 
,  ...    ^     .       ,1         ,of  beii>g  p4ssed,  was  taken  ;  it  may 
have  been!  taken  from  a  thief  ;/noi4gh  that  the  holder  took  it 
bona  fiqe  and  for  valuable  consideration. 


The  ekistfence  ofl  equities  As  ty  be  shown  by  the  defendant 
and  fixed\  upAn  the!plainljiff,/aftei'  the  plaintiff  Wb  made  a  pre- 
Fraud,  illegaV  sWmptjve  case/,  aiiid  that,  as  we^ave  seen,  the 
mVt  by  pla\nA,  pW^^*^^  niake^  by  tiroducing  tWpaper  in  evidence, 
tiff.  N/1iljly  indorsed /wl^  indorspi^pt  is  necess^aa^y,  and 


^h^^SmitiTr27  N.  H.  244  ;  John- 
■fmsh,  10  N.   H.  505;  Gibson  v. 


\  Thompson  v.  D>4ggs,  28  N.  H.  40 ; 
leaves,  15   N.  H.  332  \  /af 
|2. 

I  17  lo^a^OS;  Curtis  v.  Mohr,  18  Wis.  615  ;  Logan 
V.  Smith,  62  Mo.  455. 

8  Housum  V.  Rogers   40  Pe^n.  St.   190 ;  Washington  Bank  v.  Krum,  15 
Iowa,  53. 

*  See  Scott  v.  Ocean  bank,  2^  N.  Y.  289. 


hi^ci.i.]  EQUITIES. 

proving   the    signatures.'      In  certain   cases    the  defendant  is 
helped  out  in  his  case  by  presumption  ;   in  others  he  is  not. 

If  the  defendant  can  show  that  the  instrument  was  obtained 
from  him  by  fraud  or  by  duress,  or  if  he  can  show  that  it  was 
tainted  in  the  hands  of  the  party  who  took  it  from  him,  with 
illegality,  he  makes  out  his  case  by  presumption  against  the 
plaintiff;  for  the  law  presumes  on  such  a  state  of  facts  that  the 
plaintiff  is  not  the  true  holder,  that  the  true  holder  is  the  man 
affected  by  the  taint  of  fraud,  durass,  or  illegality,  and  that  he 
has  merely  turned  the  paper  over  to  the  plaintiff  colorably  for 
the  purpose  of  suit.^ 

In  other  words,  the  law  presumes,  in  such  cases,  that  the 
plaintiff  is  at  least  not  a  holder  for  value  ;  and  the  plaintiff 
is  now  put  to  his  proofs  to  sustain  his  claim.  For  example: 
The  plaintiff  i§  indorsee  of  a  promissory  note  made  by  the 
defendants,  and  now  sued  upon.  The  defendants  offer  to  show 
that  the  payee  of  the  note  illegally  arrested  them,  and  that 
this  note  was  given  to  procure  their  release  from  duress,  upon 
the  promise  of  the  payee  to  set  them  at  liberty,  which  was  ac- 
cordingly done.  They  offer  no  other  evidence ;  nor  does  tlie 
plaintiff  offer  any  evidence  to  meet  it,  and  a  verdict  is  taken  for 
the  defendants  by  consent,  subject  to  the  opinion  of  the  court. 
The  defendants'  evidence  is  sufficient ;  proof  of  duress  by  the. 
payee  would  be  a  good  defence  against  him;  and  the  presump- 
tion- is  that  the  payee,  being  guilty  of  illegal  conduct,  has 
placed  the  note  in  the  hands  of  the  plaintiff, to  sue  upon  it  for 
him.'''  Again :  The  plaintiff  is  indorsee,  and  the  defendants  are 
acceptors,  of  a  bill  of  exchange  now  sued  upon.  The  defendants 
offer  to  prove  that  the  bill  was  accepted  by  them  in  paj'ment 
of  intoxicating  liquor  sold  to  them  by  the  payees  in  violation 
of  statute,  and  offer  no  other  evidence.  The  plaintiff  objects  to 
the  admissibility  of  the  evidence,  and  the  objection  is  sustained, 
and  judgment  rendered  for  the  plaintiff.     The  ruling  against 

^  Ante,  p.  198.  Statute  in  many  States  dispenses  with  the  necessity  of 
proving  signatures  the  genuineness  of  which  is  not  expressly  denied. 

2  Giant  V.  Walsh,  145  N.  Y.  502,   507.     See  notes  to  Bedell  v.  Herring 
n  Am.  St.  Rep.  320. 

«  Clark  V.  Pease,  41  N.  H.  414. 


252  BILLS,  NOTES,  AND   CHEQUES.  fCHAK  XV  U 

receiving  tlie  evidence  offered  by  the  defendants  is  wrong;  the 
evidence  is  proper  and  is  sufficient  to  raise  a  presumption  that 
the  payees  have  put  the  bill  into  the  hands  of  the  plaintiff  to 
sue  upon  it  for  them.^ 

How  far  the  plaintiff'  indorsee  should  go  in  the  way  of  meet- 
ing the  presumption  is  not  quite  clear.  The  authorities  vary 
somewhat  in  the  matter,  at  least  in  language.  The  plaintiff' 
must  at  least  show  that  he  took  the  instrument  for  value  •  but 
what  else  is  the  question.  Some  authorities  declare  that  he 
must  also  give  in  evidence  the  circumstances  under  which  he 
took  it.  If  that  evidence  does  not  indicate  that  he  took  the 
instrument  with  notice  of  the  equity,  and  is  believed,  he  will 
theu,  it  is  said,  be  entitled  to  recover.^  In  other  words,  ac- 
cording to  this  doctrine,  it  appears  not  to  be  required  of  the 
plaintiff,  in  answer  to  the  evidence  of  fraud,  duress,  or  illegality, 
that  he  should  give  evidence  directly  to  the  purpose  of  showing 
that  he  took  without  notice.  But  perhaps  the  better  rule  is  that 
the  plaintiff  should  show  that  he  took  the  instrument  in  good 
faith,  for  value,  and  before  maturity.^ 

In  the  case  of  other  equities,  such  as  want  or  failure  of  con- 
Want  of  con-  sideration,  proof  of  their  existence  raises  no  pre- 
sideration.  sumption  against  an  indorsee  claiming  to  be  a  bona 

tide  holder  for  value.*     The  evidence  would,  therefore,  be  insuffi- 

1  Paton  V.  Coit,  5  Mich.  505  ;  Cases,  311. 

2  See  Paton  v.  Coit,  5  Mich.  505  ;  Cases,  311.  See  Hazard  v.  Spencer, 
17  R.  I.  561;  Millard  v.  Barton,  13  R.  L  605  ;  First  National  Bank  v.  Green,' 
43  N.  Y.  298,  300;  Grant  v.  Walsh,  145  N.  Y.  507. 

'  '  The  only  effect  of  showing  that  the  paper  was  fraudulently  put  into  cir- 
culation would  be  to  put  upon  the  plaintiff  the  burden  of  showing  that  he 
took  the  paper  in  good  faith,  and  for  value,  and  before  maturity,"  Shattuck 
V.  Eldredge,  173  Mass.  165,  170,  Barker,  J.  ;  Holden  r.  Phoenix  Rattan  Co., 
168  Mass.  570,  572.  See  further  Stewart  v.  Lansing,  104  IT.  S.  505;  Hazard 
V.  Spencer,  17  R.  L  561;  Kenny  v.  Walker,  29  Oreg.  41;  Owens  v.  Snell,  id. 
483  ;  National  Bank  v.  Miller,  51  Neb.  156  ;  Campbell  v.  Hoff,  129  Mo. 
317  ;  Banks  v.  McCosker,  82  Md.  518,  524  ;  Limerick  Bank  v.  Adams,  70 
Vt.  132,  142  ;  Wing  v.  Ford,  89  Maine,  140. 

*  Wilson  V.  Lazier,  11  Gratt.  477;  Holden  v.  Phoenix  Rattan  Co.,  168 
Mass.  570,  572  (on  the  distinction  between  fraud  and  want  of  consideration). 
A  fortiori  of  evidence  that  the  defendant  signed  for  accommodation,  for  that  is 
not  of  itself  an  equity.  Duncan  v.  Gilbert,  5  Dutch,  521  ;  Grant  v.  Ellicott, 
7  Wend.  227  ;  Knight  i-.  Pugh,  4  Watts  &  S.  445. 


Sect.  4.]  EQUITIES.  '253 

cient  to  meet  the  plaintiff's  case;  though  his  own  case  is  only 
presumptive,  for  he  has  thus  far  given  no  actual  evidence,  other 
than  by  the  production  of  the  paper,  that  he  is  a  bona  fide 
holder  for  value.  The  defendant  must  accordingly  go  further, 
and  give  evidence  either  that  the  plaintiff  took  with  notice  of 
the  equity  in  question  or  that  he  is  not  a  holder  for  value.  ^ 

Taking  paper  with  notice,  or  without  valuable  consideration, 
subjects  the  taker,  however,  only  to  such  equities  as  existed  at 
the  time  he  took  it  ;  if  none  then  existed,  his  title  Time  of 
will  be  good.  It  is  then  no  defence  that  the  holder  ^qu't'^s. 
took  the  paper  after  its  maturity ;  the  effect  of  so  taking  the 
paper  is  to  subject  him  to  equities  existing  against  the  holder 
at  maturity,  and  if  none  exist  he  is  entitled  to  recover.  Nego- 
tiable paper  does  not  lose  its  property  of  negotiability  on  passing 
its  maturity.^  Even  accommodation  paper  known  to  be  such  may 
be  transferred  after  maturity;  though  if  .so  transferred  by  the 
party  accommodated,  it  will  carry  notice  of  an  equitj',  to  wit, 
that  the  defendant  loaned  his  credit  oiilv  until  the  paper  be- 
came due.' 

It  should  also  be  observed  that  if  the  holder  was  a  holder  for 
value  bona  fide  when  he  took  the  paper,  he  will  remain  such, 
though  afterwards  he  may  become  aware  of  some  equity  which 
might  have  been  set  up  against  a  prior  holder.  Indeed,  as  we 
have  seen,  it  is  no  defence  that  the  holder  knew,  when  he  took 
the  paper,  of  the  existence  of  an  agreement  between  the  defendant 
and  the  party  next  after  him,  under  which  equities  then  existed 
or  have  since  arisen,  if  he  had  no  knowledge  of  the  equities 
when  he  took  the  paper.*  If,  however,  the  holder  made  but 
part  payment    of   the   purchase   price   of  the    instrument,  and 

^  See  Paton  i'.  Colt,  supra  ;  Clark  v.  Pease,  41  N.  H.  414. 

2  Leavitt  v.  Piitnain,  3  Comst.  494  ;  Cases,  317. 

«  Chester  v.  Dorr,  41  N.  Y.  279;  Bovver  v.  Hastings,  36  Penn.  St.  285  ; 
Kellogg  V.  Barton,  12  Allen,  527;  Cottrell  v.  Walkins,  89  Va.  801  ;  Peale  v. 
Addicks,  174  Penn.  St.  549.  Further  see  Charles  v.  Marden,  1  Taunt.  224  ; 
Sturtevant  v.  Forde,  4  Man.  &  G.  101  ;  Caruthers  v.  West,  12  Q.  B.  143; 
Jewell  V.  Parr,  13  C.  B.  909  ;  Story,  Notes,  §  194. 

*  Patten  v.  Glea.son,  106  Mass.  439  ;  Berkeley  v.  Tinsley,  88  Va.  1001. 


*  '***  *    ^^5?^^  '*^       BICl^.^tes,  ^nd' cheques. "   ^iIXF  .> , ._ 

.   A^:ac^  before  completing  payment   received    notice   of   an    equity,  he  ^ 

t^^^^^S    cannot  become  a  bona  fide  holder  for  value  except  in  respect  of 
^  t^^J^xiM.i^^^  ^^^^  payment. ^ai> 

remains  to  consider  what  is  meant  by  equities.  The 
answer  in  general  is  plain  enough;  any  facts  which  would  be  a 
What  equities  defence  to  an  ordinary  simple  contract  of  the  com- 
^'"^"  mon  law,  not  being  what  we  have  called  Absolute 

Defences,  may  be  and  commonly  are  called  equities,  —  with  one 
or  two  exce{)tions. 

The  exceptions  are  made  by  accommodation  contracts  of  the 
law  merchant.  It  is  no  defence  to  a  suit  upon  a  bill,  note,  or 
cheque,  that  the  plaintiff  took  the  paper  with  notice  or  even 
with  direct  knowledge  that  the  defendant  signed  the  same  for 
iaccommodation,  not  doing  so  for  the  accommodation  of  the  plain- 
tiff; for  he  gave  the  use  of  his  name  and  credit  for  the  express 
purpose  of  enabling  the  party  accommodated  to  get  credit.^  The 
case  is  as  if  the  defendant  had  said  to  the  plaintiff,  '  If  you  will 
let  this  man  have  money  I  will  see  that  you  are  paid  ;  '  the 
accommodation,  unlike  want  or  failure  of  consideration  in  the 
ordinary  sense,  is  not  an  equity. 

If,  however,  the  instrument  was  used  in  substantial  violation 
of  the  material  terms,  if  any,  upon  which  the  accommodation  was 
given,  that  will  make  a  different  case;  such  use  would  be  a 
fraudulent  diversion,  would  constitute  an  equity,  in  the  face  of 
which  the  plaintiff  could  recover  only  upon  the  footing  that  he 
was  a  holder  in  due  course.^  For  example  :  The  plaintiffs  are 
indorsees  for  value,  and  the  defendant  is  accommodation  in- 
dorser,  of  a  promissory  note  now  sued  upon.  The  maker  of  the 
note  was  indebted  to  the  plaintiffs,  and  in  adjusting  the  debt 
the  plaintiffs  said  that  they  would  accept  the  defendant  as 
surety.     The  defendant  finally  indorses  the  note  for  the  accom- 

'  Dresser  v.  Missouri  Const.  Co.,  93  U.  S.  92  ;  N.  I.  L.  §  61. 

2  Grant  v.  Ellicott,  7  Wend.  227. 

2  Shattuck  V.  Eldridge,  173  Mass.  165.  If  one  is  to  raise  money  on  the 
paper  for  the  lender  of  it,  and  then  pledges  the  paper  for  one's  own  benefit, 
there  is  fraud.     Id. 


Sect.  4.]  EQUITIES.  255 

modation  of  the  maker  upon  condition  that  a  third  person,  who 
then  held  a  note  made  by  the  defendant,  deposited  that  note 
with  another  to  be  lield  by  him  until  the  defendant  should  be 
discharged  from  the  indorsement.  The  condition  was  not  com- 
plied with,  and  the  facts  were  known  to  the  plaintiff  when  ha 
took  the  note.      The  plaintitf  is  not  entitled  to  recover.^ 

On  the  other  hand  if  the  diversion  is  not  material,  it  will  not 
affect  the  holder  who  takes  the  paper  for  value.  The  fact  that 
the  instrument  is  not  used  in  precise  conformity  to  the  purpose 
for  which  the  accommodation  was  given  is  not  fraud.  Indeed 
entire  failure  to  comply  with  the  direction  maij  not  be  fraudu- 
lent, for  the  direction  may  appear  to  be  incidental  or  immaterial. 
Thus  accommodation  paper  which  is  to  be  discounted  at  a  bank 
named,  by  direction  of  the  party  giving  the  accommodation, 
may  be  discounted  elsewhere  and  the  proceeds  applied  to  other 
purposes  than  those  intended,  in  the  absence  of  fraud.^ 

The  distinction  between  absolute  defences  and  equities,  after 
what  has  been  said  in  the  preceding  chapter,  will  generally 
be  plain.  One  case,  however,  already  alluded  to,  Filling  blanks 
should  be  stated  with  clearness  here.  Alteration  wrongfully, 
of  the  instrument  makes  an  absolute  defence ;  to  till  a  blank 
space  left  in  a  completed  instrument  being  an  example.  But  to 
fill  a  blank  space  in  an  imcompleted  instrument,  —  such  as  a 
promissory  note  signed  in  blank,  —  which  has  been  put  into  the 
hands  of  a  person  who  betrays  the  signer's  confidence  by  filling 
the  blank  and  delivering  the  instrument  in  violation  of  instruc- 
tions, is  not  an  alteration.  It  is  or  may  be  a  fraudulent  act,  but 
it  is  not  criminal,  unless  statute  make  it  so.  It  is  simply  a 
case  of  agency  in  which  the  principal's  confidence  has  been 
abused;  but  the  act,  notwithstanding  its  wrongfulness,  binds 
the  principal  in  favor  of  bona  fide  holders  for  value. ^  It  is 
only  an  equity. 

1  Small  V.  Smith,  1  Denio,  583.  The  transferrer  would  be  liable  in 
damages  for  any  loss  caused  to  the  party  whose  confidence  he  has  abused. 
Nashville  Lumber  Co.  v.  Fourth  National  Bank,  94  Tenn.  374;  s.  c.  27 
L.  R.  A.  5\9  and  note  ;  45  Am.  St.  Rep.  727. 

2  First  National  Bank  v.  Wood,  8  Texas  Civ.  A  p.  554. 

3  Angle  r.  Northwestern  Ins.  Co.,  92  U.  S.  330. 


256  BILLS,  NOTES,  AND   CHEQUES.        [Chap.  XVU. 

The  rule  uf  law  upon  this  point  may  be  thus  stated:  One 
who  writes  his  name  as  maker,  acceptor,  drawer,  or  indorser, 
and  intrusts  the  paper  to  another  to  fill  up  the  contract  and 
make  him  party  to  a  negotiable  instrument,  thereby  confers 
upon  the  person  so  intru.sted,  in  favor  of  bona  fide  holders  for 
value,  the  right  to  complete  the  contract  at  pleasure,  so  far  as 
consistent  with  the  instrument  as  written  or  printed  at  the  time 
it  is  delivered  to  the  person  intrusted  with  it.^ 

By  the  law  merchant  equities  can  arise  only  out  of  the  trans- 
action   itself   in   which    the    defendant  became  a  party  to  the 

,    ,  paper. ^     Statute  may,   indeed,  enable  a  defendant 

Out  of  what         ^    ^        .      .  .  f.      e       \  1    •  .  1       . 

equities  must  to  avail  himself  of  other  claims  against  the  imme- 
*"*^'  diate  party  thereto,   by  way  of  set-off ;  but  unless 

the  statute  go  further,  these  will  not  be  equities,  and  will  not 
be  available  against  a  later  party,  even  though  he  took  the 
paper  (for  value)  with  knowledge  of  the  right  of  set-oft',^  at  least 
if  the  paper  was  taken  by  him  before  maturity.  If  it  was  taken 
after  maturity,  the  contrary  appears  to  be  true,  under  some 
statutes.* 

Finally  an  indorsee  may  recover  in  the  face  of  equities  known 

to  him  when  he  took  the  paper,  and  further  though  he  took  it 

. ,    without  valuable  consideration,  if  between  him  and 
liesting  on  title  .  ' 

of  earlier  the  defendant  there  is  one  who  was  a  bona  fide 

holder  for  value,  and  the  indorsee  was  not  himself 

a  party  to  any  fraud  or  illegality  affecting  the  instrument.^    The 

^  Angle  V.  Northwestern  Ins.  Co.,  supra  ;  Whitmore  v.  Nickerson,  125 
Mass.  496;  Greenfield  Bank  v.  Stowell,  12.3  Mass.  196,  199,  203;  Blakcy 
V.  Johnson,  13  Bush,  197  ;  Sittig  v.  Birkestack,  38  Mel.  158 ;  Ledwiek  v. 
McKim,  53  K  Y.  307;  Burson  v.  Huntington,  21  Mich.  415  ;  Van  Etta  v. 
Evenson,  28  Wis.  33  ;  Yocum  v.  Smith,  63  111.  321. 

2  Hunlerth  v.  Leahy,  146  Mo.  408;  Young  Men's  Gymnasium  Co.  v.  Rock- 
ford  Bank,  179  111.  599. 

3  See  Whitehead  v.  Walker,  10  Mees.  &  W.  696  ;  In  re  Overend,  L.  R. 
6  Eq.  344  ;  Chandler  v.  Drew,  6  N.  H.  469  ;  Arnot  v.  Woodburn,  35  Mo.  99 ; 
Way  V.  Lamb,  15  Iowa,  79. 

♦  Baxter  v.  Little,  6  Met.  7. 

5  N.  I.  L.  §  65  ;  Hascall  v.  Whitmore,  19  Maine,  102.  See  also  Cromwell 
V.  Sac,  96  U.  S.  51  ;  Marion  i;.  Clark,  94  U.  S.  278 ;  Mornyer  v.  Cooper,  35 


8ect.  5.]  EQUITIES.  257 

defendant  would  be  liable  to  such  prior  holder,  and  the  plaintiff  ) 
only  stands  in  his  place.     For  example:  The  plaintiffs  are  joint/ 
indorsees,  and  the  defendant  is  maker,  of  a  promissory  note  sue<Y 
upon.    There  was  no  consideration  between  the  original  parties,^ 
and  the  note  was  not  made  for  accommodation.     One  of  the  plain- 
tiffs is  a  bona  fide  holder  for  value,  the  other  took  the  note  with 
notice  of  the  want  of  consideration;  but  title  is  derived  through 
others  who  were  bona  fide  holders  for  value.     The  plaintiffs  ar 
entitled  to  recover.^ 


arof 


§  5.     Amount  of  Recovery. 


The  question  often  arises  where  the  holder,  being  a  bona  fide 

holder  for  value,  has  not  paid  the  face  or  market  value  of  the 

bill,  note,  or  cheque,  whether  he  is  entitled  to  re-  „  , .       . 

^  '  1     '  Paper  sold  and 

cover  the  face  value  or  must  be  content  with  less,   paper  taken  to 
and  if  with  less,  how  much  less,  assuming  the  ex- 
istence of  equities  available  against  a  prior  holder.     The  ques- 
tion will  depend  upon  the  consideration  whether  the  instrument 
was  (1)  bought  outright  or  taken  in  absolute  payment  of  debt, 
or  (2)  taken  to  secure  or  in  conditional  payment  of  debt. 

If  the  holder  took  the  instrument  in  the  first  way,  he  is  en- 
titled, by  the  decided  weight  of  authority,  to  claim  the  face 
value,  though  he  may  have  paid  much  less  for  it,  assuming, 
of  course,  that  he  is  a  bona  fide  holder  for  value. '^  The 
holder  is  entitled  to  recover  the  face  of  the  instrument  not 
only  when  he  has  bought  the  paper  in  the  ordinary  sense, 
as  by  discounting  it,  but  also  when  he  has  taken  it  in  pay- 
Iowa,  257;  Boyd  v.  McCann,  10  Md.  118  ;  Prentice  v.  Zane,  2  Gratt.  262  ; 
Lynchburg  v.  Slaughter,  75  Va.  57  ;  Jones  v.  Wiesen,  50  Neb.  243  ;  Bassett 
V.  Avery,  15  Ohio  St.  299  ;  Woouworth  v.  Huntoon,  40  111.  131  ;  Robinson  v. 
Reynolds,  2  Q.  B.  196,  211.     But  see  Elwell  v.  Tatum,  6  Texas  Civ.  Ap.  397. 

1  Hascall  v.  Whitmore,  supra. 

2  Fowler  v.  Strickland,  107  Mass.  552  ;  Cromwell  v.  Sac,  96  IT.  S.  51  ; 
Dresser  v.  Missouri  Ry.  Co.,  93  U.  S.  92  ;  Moore  v.  Baird,  30  Penn.  St.  138  ; 
Bange  v.  Flint,  25  Wis.  544  ;  Lay  v.  Wissman,  36  Iowa,  305  ;  Bailey  v. 
Smith,  14  Ohio  St.  396;  Jones  v.  Gordon,  2  App.  Cas.  616,  622;  In  re 
Gomersall,  L.  R.  1  Oh.  137,  142.  But  see  Opi>enheimer  v.  Bank,  97  Tenn. 
19,  holding  that  in  case  of  fraud  (available  against  a  prior  holder)  the  plain- 
tiff can  recover  no  more  than  he  paid  for  the  instrument. 

17 


258  BILLS,  NOTES,  AND   CHEQUES.         [Chap.  XVIL 

ment  of  property  then  sold,  or  in  the  course  of  a  barter,  or 
has  given  his  negotiable  security  for  it,  provided  it  was  received 
in  absolute  payment.^  It  matters  not  whether  the  defendant's 
contract  was  entered  into  for  actual  or  supposed  valuable  con- 
sideration or  for  accommodation.'^ 

Some  authorities  however  hold  that  where  the  plaintiff  [»aid 
less  than  the  face  value,  he  can,  against  one  in  whose  favor 
equities  exist  which  would  be  available  against  a  prior  holder, 
recover  no  more  than  he  or  some  holder  before  him  paid  for  the 
paper.* 

If  the  holder  took  the  paper  to  secure  or  in  conditional  pay- 
ment of  a  debt,  precedent  or  then  newly  created,  obviously  liis 
claim,  between  him  and  his  debtor,  cannot  be  greater  than  the 
amount  due  on  the  debt  ;  *  but  it  may  be  that  the  debtor  him- 
self had  a  claim  for  the  full  amount  of  the  paper,  notwithstand- 
ing the  equities,  and  in  that  case  his  creditor,  the  holder,  would 
be  entitled  to  recover  the  face  value,  holding  the  excess  above 
the  debt  in  trust  for  the  debtor.^  Or  it  may  be  that  some  prior 
holder  might  claim  the  face  value  of  the  instrument ;  in  such  a 
case  too  the  defendant  owes  the  amount  to  some  one,  and  it 
cannot  matter  to  him  who  demands  it,  provided  the  person  can 
give  him  a  discharge.^  If  however  no  one  had  a  better  claim 
upon  the  instrument  than  the  debtor,  the  creditor  will  be  en- 
titled to  recover  no  more  than  the  amount  of  his  debt  j  assum- 
ing the  existence  of  equities  against  the  debtor.'' 

1  Dresser  r.  Missouri  Ry.  Co.,  supra  ;  Woodruff  i'.  Hill,  116  Mass.  310. 

2  Allaire  v.  Hartshorne,  1  Zabr.  665 ;  Williams  v.  Smith,  2  Hill,  301 ; 
Edwards  v.  Jones,  2  Mees.  &  W.  414. 

3  Holcomb  V.  Wyckoff,  35  N.  J.  35  ;  Holman  v.  Hobson,  8  Humph.  127. 

*  See  Park  Bank  v.  Watson,  42  N.  Y.  490. 

^  Lay  V.  Wissman,  36  Iowa,  305  ;  Allaire  v.  Hartshorne,  1  Zabr.  665  ; 
Chicopee  Bank  v.  Chapin,  8  Met.  40,  44. 

*  Allaire  v.  Hartshorne,  supra. 

'  Memphis  Bethel  v.  Bank,  101  Tenn.  130. 


Sect.  1]  DISCHARGE  OF  SURETY.  259 


CHAPTER  XVIII. 

DISCHARGE   OF  SURETY:    DEALINGS   WITH  PRINCIPAL 

DEBTOR. 

§  1.  Indorser  as  Surety:  the  Statute. 

If  the  doctrines  of  the  hiw  pertaining  to  the  contracts  ot 
guaranty  and  suretyship  in  regard  to  dealings  with  the  princi- 
pal debtor  were  confined  to  those  two  subjects,  this  .  , 
chapter  would  be  unnecessarj' ;  at  any  rate,  it  surety  of  law 
would  only  be  necessary  to  say  that  dealings  with 
the  principal  debtor  have  the  same  effect  upon  the  contract  of  a 
guarantor  or  a  surety  in  contracts  of  the  law  merchant  as  else- 
where in  the  law.  But  those  doctrines  are  not  confined  to 
guaranty  and  suretj'^ship;  they  apply  to  indorsement  as  well, 
indorsement  itself  being  in  reality  a  contract  of  assurance, 
though  in  a  sense  of  its  own  ;  indeed,  for  the  purposes  in  ques- 
tion, indorsement  is  often  called  a  contract  of  suretyship.  It 
is  obvious  that  each  indorser  is  then  a  surety,  not  merely  for 
the  maker  or  acceptor,  but  also  for  all  parties  before  him;  all 
prior  parties,  in  other  words,  are  principal  debtors  in  relation 
to  any  particular  indorser,  and  so  the  matter  must  be  under- 
stood in  this  chapter. 

The  fact  should,  therefore,  be  stated  that  dealings  with  the 
principal  debtor  which  would  have  the  effect  to  discharge  a 
surety  in  the  ordinary  sense  will  have  a  like  effect  upon  an 
indorser  and  all  other  parties  secondarily  liable.^ 

The  Statute  puts  the  matter  of  discharging  parties  second- 
arily liable  thus :  A  person  secondarily  liable  on  the  instrument 

1  For  convenience  the  word  '  indorser '  will  often  be  used  in  the  present 
chapter  in  a  comprehensive  sense,  as  including  all  parties  secondarily  liable. 


260  BILLS,  NOTES,  AND   CHEQUES.        [Chap.  XVIII. 

is  discharged  (\)  by  any  act  which  discharges  the   iiislniment; 

,     ,  (2)  by  the  intentional  cancellation  of  hi.s  signature 

How  the  Stat-     ^  /     -^  o 

ute  deals  with  by  the  holder,  (3)  by  the  discharge  of  a  prior 
e  su  jec  .  party;  (4)  by  a  valid  tender  of  payment  made  by  a 
prior  party  J  (5)  by  a  release  of  the  principal  debtor,  unless  the 
holder's  right  of  recourse  against  the  party  secondarily  liable  is 
expressly  reserved;  (6)  by  any  agreement  binding  upon  the 
holder  to  extend  the  time  of  payment  or  to  postpone  the  holder's 
right  to  enforce  the  instrument,  unless  the  right  of  recourse 
against  such  party  is  expressly  reserved.^ 

The  present  chapter  will  however  treat  only  of  dealings  with 
the  principal  debtor,  affecting  the  rights  of  the  surety. 

§  2.     Surrender  of  Securities. 

One  of  the  chief  rules  of  suretyship  is  that  the  creditor  must 

not  surrender  to  the  principal  debtor  securities  placed  in  his 

hands  to  assure  performance  of  the  contract  or  pay- 
Subrogation.  ,.11,.  1  11         1 

ment  ot  the  debt,  on  the  ground  that  the  surety, 

in  virtue  of  a  doctrine  of  equity  called  subrogation,  would  be 

entitled   to    such    securities   for    the    same  purpose   in   case   he 

should  be  compelled  to  pay,  or  being  bound  to  pay  should  pay 

voluntarily.      The   surrender   of   such   securities,   without   the 

surety's  consent,  would  therefore  be  a  violation  of  the  surety's 

rights,  and  hence  would  discharge  him  to  the  extent  ofJbLis  loss.^ 

That  rule  applies  as  well  in  favor  of  an  indorser  in  the  case  of 

dealings  of  the  kind  between  the  holder  of  the  paper  and  any 

party  before  the  indorser. 

§  3.    Agreement  for  Time:   Compositions:   Reservation 

OF  Rights. 

Another  of  the  chief  rules  of  suretyship  is  this:  The  creditor 
must  not  discharge  the  principal  debtor,  or  make  any  binding 

*  No  consideratiou  is  necessary  for  discharging  the  party. 
»  N.  L  L.  §  127. 

3  Shannon  v.  McMullin,  25  Gratt.  211.     See  Vose  v.  Florida  R.  Co.,  50 
N.  Y.  369,  37.5. 


Sect.  3.]  DISCHARGE   OF   SURETY.  261 

agreement '  with  him  to  extend  the  time  of  performance  agreed 
upon  in  the  contract  with  the  surety,  without  the  Discharge  of 
surety's  consent,  unless  (in  cases  where  he  may)  he  Sebtor'' or  ex- 
plainly  reserves  his  rights  against  the  surety.     To  tending  time, 
give  such  a  discharge,  or  to  make  sucli  an  agreement,  without 
the   reservation   of   rights,   would   discharge   the  surety.     That 
rule  also  applies  to  indorsers  and  other  [)arties  secondarily  lia- 
ble;  binding  agreements  of  the  kind,  without  consent  of  such 
parties  and  without  a  reservation  of  rights  against  them,  operate 
as  a  discharge  of  their  liability,'^ 

In  regard  to  discharges,  the  rule  is  that  u  discharge  of  any 
party  to  a  bill,  note,  or  cheque  is  a  discharge  of  all  subsequent 
non-consenting  parties,  not  merely  where  the  discharge  granted 
m  favor  of  the  earlier  party  is  effected  by  payment  of  the  paper 
by  him,  but  presumptively  where  it  arises  from  mere  agreement 
to  compound  or  release  liability.  Payment  of  the  paper  extin- 
guishes it,  and  hence  the  liability  of  all  parties  to  it  ;  agreement 
to  compound  discharges  the  party  towards  the  holder,  and  so 
may  well  be  treated  as  a  presumptive  discharge  of  all  who  folluw 
as  sureties  for  him.  For  example  :  The  defendant  is  second 
indorser,  with  liability  once  duly  fixed,  and  the  plaintiff  is  holder 
of  a  promissory  note.  The  plaintiff  gives  a  discharge,  without 
the  defendant's  consent,  to  the  first  indorser  of  the  note,  by  con- 
tract under  seal  ;  that  party's  liability  also  having  been  duly 
fixed.     The  defendant  is  discharged.'* 

It  is  true  that  in  such  a  case  the  defendant,  if  compelled  to 
pay,   would  have   recourse   over  against   the   prior  prgg„„,pji,,g 
party  discharged;  but  the  practical  result  of  such  effect:  reserva- 
recourse  in  most  cases  would  be  that  the  party  who    '""  °  ^^ 

1  It  is  said  that  a  mere  agreement  to  extend  the  time  of  payment  is  valid 
on  the  ground  that  it  implies  a  promise  by  the  debtor  to  pay  interest.  Nelson 
V.  Flagg,  50  Pac.  R.  571.     But  see  2  Daniel,  Neg.  Inst.  1319  a  ;  Woodhall  v. 

^Streeter,  39  S.  W.  169  (Texas). 

2  N.  I.  L.  §  127,  supra.  See  Shannon  v.  McMullin,  25  (^ratt.  211  ;  Dey  i;. 
Martin,  78  Va.  1 ;  Exchange  Bank  v.  Bayless,  91  Va.  134  ;  Beacon  Trust  Co.  v. 
Robbins,  173  Mass.  261,  271,  274.  In  Massachusetts  discharge  of  the  maker 
under  composition  proceedings  does  not  discharge  indorsers,  in  virtue  of 
itatute.     Skillings  v.  Marcus,  159  Mass.  51. 

'  Newcomb  v.  Raynor,  21  Wend.  108. 


262  BILLS,  NOTES,  AND  CHEQUES.        [Chap.  XVIII. 

gave  the  discharge  would  have  to  defend  the  suit,  or  would  be 
liable  for  the  amount  of  the  judgment  obtained.  To  hold,  then, 
that  that  party  cannot  sue  the  later  indorser  prevents  needless 
circuity  of  action.^  Still  the  resulting  discharge  of  the  later 
party  is  deemed  presumptive  only,  and  the  presumptive  inten- 
tion may  in  some  cases  be  rebutted.  That  may  be  accomplished 
by  the  holder's  reserving  his  rights, '^  so  far  as  he  may,  against 
the  subsequent  parties,  as  where  the  indorser  himself  is  a  party 
to  the  discharge  granted  to  the  earlier  party.^  For  example: 
The  defendant  is  indorser  with  liability  once  fixed,  and  the 
l>laintiff  is  holder,  of  a  promissory  note  payable  to  A,  who  in- 
dorses it  to  the  defendant,  who  indorses  it  to  the  plaintiff.  The 
maimer  and  A  make  a  composition  deed  with  their  creditors,  con- 
veying all  their  estate  to  trustees,  among  them  the  defendant, 
and  are  discharged,  the  deed,  however,  containing  a  proviso  that 
'  it  shall  not  operate  in  favor  of  or  be  construed  to  release  any 
persons  or  person  who  may  be  bound  '  for  the  maker  or  A,  '  or 
who  may  have  indorsed  any  note  or  notes  drawn  or  indorsed  by ' 
both  or  either  of  them.  The  defendant,  being  a  party  to  the 
composition  deed,  is  not  discharged.* 

A  like  case  would  be  made  where  the  discharge  arises  from  a 
merely  personal  agreement  by  the  holder  not  to  sue  the  party  in 
whose  favor  the  discharge  runs  ;  for  in  such  a  case  the  person  so 
agreeing  would  not  incur  any  liability  if  another  should  sue, 
and  hence  he  would  not  have  to  defend  suit  brought  by  the  later 
party  against  the  one  discharged  by  agreement,  nor  would  he  be 
affected  in  any  way  by  judgment  obtained  by  the  plaintiff  in  such 
suit.  True,  the  party  discharged  in  that  way  might  not  gain 
much  b}'^  the  agreement,  since  a  later  party,  compelled  to  pay, 
might  sue  him  upon  his  indorsement  or  other  contract;  but  that 
would  be  his  own  affair,  and  would  not  affect  the  case.     The  pre- 

1  Newcomb  v.  Raynor,  21  Wend.  108. 

2  Beacon  Trust  Co.  v.  Rohbins,  173  Mass.  261,  271,  274. 
8  Exchange  Bank  v.  Bayless,  91  Va.  134. 

*  Pannell  v.  McMechen,  4  Har.  &  J.  474.  See  also  Beacon  Trust  Co.  v. 
Bobbins,  173  Mass.  261,  271,  274  ;  Sohier  v.  Loring,  6  Cush.  537  ;  Cases,  334  ; 
Morse  v.  Huntington,  40  Vt.  488;  Hagey  i;.  Hill,  75  Penn.  St.  108  ;  Overencf 
V.  Oriental  Corp.,  L.  R.  7  H.  L.  348. 


StCT.  3.]  DISCHARGE.  OF  SURETY.  263 

sumptive  intention  to  discharge  the  later  party  would  be  duly 
rebutted.^ 

It  should  be  understood,  however,  that  the  composition  deed, 
or  other  agreement  to  discharge,  must  not  amount  to  a  release 
in  the  technical  sense  of  the  common  law.  A  re-  Release  in  tech- 
lease  in  that  sense  is  a  conveyance  (by  deed)  of  all  "'^^^  s®"^^- 
the  releasor's  interest,  as  is  shown  by  the  English  common  law 
mode  of  conveying  land  by  lease  and  release ;  and  if  a  man  has 
once  conveyed  away  all  his  rights,  there  is  nothing  left  for  him 
to  reserve.  The  attempted  reservation  would  be  repugnant  to 
the  deed,  and  hence  would  be  void.  If,  however,  the  instrument, 
though  in  general  form  a  release,  can  be  construed  an  agreement 
not  to  sue,  the  reservation  may  be  good.'^ 

Indulgence  is  not  enough,  however  long,  within  the  period 
of  limitation,'  even  though  the  indorser  suffer  damage  by  reason 
of  the  delay.*  But  express  agreement  is  not  neces-  indulgence 
aary,*  and  difficulty  is  encountered  in  some  cases  in  "ot  enough. 
determining  whether  the  facts  amount  to  an  agreement  for  exten- 
sion. That  is  apt  to  be  the  case  where  an  additional  security 
is  taken  from  the  principal  debtor  without  any  express  under- 
standing on  the  point  of  time.  The  effect  of  such  a  transaction 
is  reached  in  certain  cases  by  presumption. 

How  the  courts  have  treated  the  taking  of  security  may  be 
shown  by  a  few  brief   statements   and   one  or  two   examples. 
Where  the  holder,  at  maturity  of  the  paper  in  ques-  Taking  se- 
tion,  takes  a  further  security  due  thereafter,  for  an  cunty. 
amount  equal  to  or  greater  than  the  debt,  a  presumption  arises 
that  it  was  understood  that  the  time  of  payment  of  the  paper  al- 

1  Compare   Sohier  v.  Loring,  supra ;   Kearsley  v.  Cole,  16   Mees.  &  W. 
128. 

2  Sohier  v.   Loring  and  Kearsley  v.  Cole,  supra,  explaining  some  of  the 
cases. 

8  Way  V.  Dunham,  166  Mass.  263. 
*  Allen  V.  Brown,  124  Mass.  77. 

^  It  is  enough  that  the  surety  has  been  led  to  change  his  position  to  hia 
prejudice,  by  the  plaintiffs  conduct.     Way  v.  Dunham,  supra. 


264  BILLS,  NOTES,  AND  CHEQUES.        [Chap.  XVIII 

ready  due  was  to  be  extended,  at  least  where  the  security  was,  as 
it  usually  is,  to  be  considered  in  satisfaction,  if  paid,  of  the  paper 
thus  secured.  And  the  result  will  be  that  non-consenting  in- 
dorsers  are  discharged,  if  rights  against  them  have  not  been 
reserved.  For  example  :  The  defendant  is  indorser,  and  the 
plaintiff  holder,  of  a  promissory  note  now  sued  upon,  upon  which 
the  usual  steps  to  fix  the  indorser's  liability  have  been  taken. 
At  the  maturity  of  the  note  the  holder  takes  from  the  maker  a 
draft  on  others  payable  six  days  thereafter,  to  be  in  satisfaction 
of  the  note  if  paid.  The  cheque  is  not  paid  when  it  comes  due. 
The  defendant  is  discharged  from  his  liability  on  his  indorse- 
ment, on  the  ground  that  presumptively  the  plaintiff  agreed  to 
extend  the  time  of  payment  by  the  maker  of  the  note  for  six 
days,  and  that  there  is  nothing  in  the  facts  to  overcome  the  pre- 
sumption.^ Again:  The  defendant  is  indorser,  and  the  plaintiff 
holder,  of  a  bill  of  exchange  overdue,  upon  which  the  usual  steps 
have  been  taken.  After  the  bill  becomes  due  the  plaintiff  takes 
part  payment  of  the  acceptor,  and  agrees  to  take  a  new  accept- 
ance from  him  payable  at  a  future  day  for  the  rest,  meantime 
keeping  the  bill  in  suit  as  security.  This  is  presumptively  an 
agreement  to  give  time,  and  there  being  no  evidence  to  rebut  the 
presumption  the  defendant  is  discharged.^ 

As  we  have  seen  in  the  preceding  chapter,  the  presuni()tioti 
appears  to  arise,  if  the  collateral  taken  is  due  at  a  time  sub- 
sequent to  that  of  the  paper  so  secured,  whether  the  amount  due 
in  the  collateral  is  as  great  as,  or  greater  than,  that  of  the  paper 
secured.  Possibly  the  presumption  may  be  stronger  where  the 
amount  is  the  same.^  Where  the  sum  payable  in  the  collateral 
is  less  than  in  the  other,  or  where  the  new  security  is  of  a  dif- 
ferent character,  as  where  the  holder  takes  a  mortgage  for  the 
payment  of  the  sum  thereafter,  it  has  been  suggested  that  no  pre- 

1  Okie  V.  Spencer,  2  Whart.  253. 

2  Gould  V.  Robson,  8  East,  576.  The  later  case  of  Pring  v,  Clarkson, 
1  B.  &  C.  14,  apparently  contra,  was  not  well  decided,  and  has  generally  been 
repudiated.  See  Kendrick  v.  Lomax,  2  Cromp.  &  J.  405  ;  Okie  v.  Spencer, 
supra. 

8  See  Michigan  Bank  v.  Leavenworth,  28  Vt.  209  ;  Atkinson  v.  Brooks, 
26  Vt.  5G9.     But  that  is  by  no  means  clear. 


Sect.  3.]  DISCHARGE  OF  SURETY.  265 

sumption  for  extension  of  time  of  the  note  or  bill  arises.'  So 
where  the  new  security  is  not  given  in  place  or  on  account  of 
the  paper  in  suit,  but  as  a  mere  pledge,  the  title  being  retained 
by  the  debtor,  so  that  the  creditor  in  taking  the  security  is  a 
mere  trustee  or  agent  of  the  debtor  for  collecting  it  and  applying 
the  money  on  the  note  or  bill  in  suit,  the  presumption,  it  seems, 
does  not  arise.' 

Again,  it  is  not  enough  that  there  is  even  express  agreement 
for  extension  of  time  (or  for  discharge) ;  the  agreement  must 
have  been   valid,  in  order  to  work  a  discharge  of  , 

the  indorser.  For  example  :  The  defendant  is  in-  time  must  have 
dorser  and  the  plaintiffs  are  holders  of  a  bill  of 
exchange,  the  steps  for  fixing  liability  having  been  duly  taken. 
Afterwards  one  of  the  plaintiffs  applies  to  the  drawer  of  the  bill 
for  payment,  and  threatens  to  sue  immediately  if  an  arrange- 
ment is  not  made  to  pay  the  bill.  The  drawer  then  proposes  to 
the  plaintiff  that  if  the  plaintiff  will  indulge  him  four  or  five 
weeks,  he  himself  will  certainly  pay  the  bill.  The  plaintiff 
agrees,  and  does  not  inform  the  defendant,  but  the  drawer  does 
not  pay  the  bill,  though  the  time  of  indulgence  has  passed. 
The  defendant  is  not  discharged,  the  agreement  being  without 
consideration.' 

Indeed  it  seems  that  the  indorser  is  not  discharged  by  an 
agreement  for  delay,  though  the  agreement  is  valid,  if  still  the 
indorser  could  not  have  had  recourse  against  the  party  to  whom 
the  indulgence  was  given,  for  between  those  two  the  situation 
is  not  one  of  principal  and  surety.  Such  would  be  the  case 
where  the  party  granted  indulgence  was  a  bankrupt  in  law  at 
the  time.  For  example  :  The  defendant  is  indorser,  and  the 
jilaintiff  holder,  of  a  promissory  note,  steps  being  duly  taken. 
At  the  maturity  of  the  note  the  plaintiff  enters  into  a  valid, 
binding  agreement  with  the  maker,  then  a  discharged  bankrupt, 
without  the  defendant's  knowledge,  by  which  the  plaintilf 
agrees  not  to  sue  the  maker  for  two  months.     The  defendant  is 

1  See  tJiuted  States  v.  Hodge,  6  How.  279. 

a  Austin  V.  Curtis,  31  Vt.  64. 

8  McLemore  v.  Powell,  12  Wheat.  554. 


266  BILLS,  NOTES,  AND   CHEQUES.        [Chap.  XVIH 

not  discharged,  because  the  indulgence  could  not  prejudice  him, 
the  defendant  haviug  no  recourse  under  the  bankruptcy  laws 
against  the  maker.^ 

Where  the  agreement,  of   whatever  nature,    made  with  the 

principal  debtor  is  in  writing,  as  usually  it  is,  the  reservation 

of  rights  must  be  in  writing  also,  bv  reason  of  the 

Written  agree-  °  .  , 

nientand  reser-  rule  which  excludes  parol  evidence  to  vary  a  written 
^^  '°°'  contract.^     There  appears  to  be  no  reason,  however, 

why  the  whole  agreement  for  discharge  or  giving  time,  together 
with  the  reservation  of  rights,  where  permissible,  may  not 
be  oral. 

There  can  be  no  reservation  of  rights  either  in  the  cases 
already  referred  to,  where  there  has  been  a  payment  of  the  in- 
Limits  of  the  strument,  or  where  the  party  attempting  to  reserve 
right  to  reserve,  -would  be  liable  over  to  the  party  discharged  or 
indulged  if  that  one  were  sued  by  the  later  party  ;  or  in  any 
case  in  which  the  rights  of  the  indorser  might  be  prejudiced 
if  he  were  to  be  held  as  still  liable.  A  case  of  the  kind  would 
occur  where  the  holder  surrendered  securities  to  which  the  in- 
dorser would  be  entitled  on  payment,  a  case  already  referred  to.' 

§  4.     Request  to  Sue. 

Another  important  rule  of  suretyship  prevails  in  many  States,* 
but  not  in  all,  to  wit,  that  the  surety  may  request  the  creditor. 
Effect  of  re-  when  the  time  of  performance  comes  on,  to  bring 
fusal.  gujit .   failing  to  heed  which  request  will  have  the 

effect  to  discharge  the  surety  to  the  extent  of  any  detriment  he 
might  thereby  sustain,  as  where  there  was  property  of  the  debtor 
within  reach  at  the  time,  which  afterwards  disappeared.  That 
rule,  it  seems,  applies  to  indorsers  ;  that  is,  an  indorser  whose 
liability  has  been  fixed,  or  who  has  waived  the  taking  of  the 
usual  stepS;  may,  where  the  rule  just  stated  prevails,  require 

1  Tiernan  v.  Woodruff,  5  McLean,  350, 
»  Hagey  v.  Hill,  75  Penn.  St.  108. 
»  Id. ;  Mayhew  v.  Boyd,  5  Md.  102. 
*  By  statute  in  some  States. 


Sect.  5.]  DISCHARGE  OF   SURETY.  267 

the  holder  to  sue  any  prior  party  bound  to  pay,  on  pain  of  dis- 
charging such  indorser  to  the  extent  of  any  loss  he  may  sustain 
by  failing  to  sue  as  requested. 

§  5.     Accommodation  Contracts. 

The  foregoing  doctrines  govern  not  only  indorsement,  but  all 
other  engagements  which  are  on  their  face,  or  are  known  to  be,^ 
secondary,  such  as  accommodation  undertakings.  Extending 
For  example:  The  defendant  is  one  of  two  joint  '^""®- 
makers  of  a  promissory  note,  having  joined  for  accommodation, 
of  which  fact  the  plaintiff,  holder  of  the  note,  was  aware  when 
he  took  it.  Without  the  defendant's  consent  the  plaintiff  has 
made  a  binding  agreement  with  the  principal  joint  maker  for 
an  extension  of  time.     The  defendant  is  discharged.^ 

Formerly,  indeed,  the  situation  of  an  accommodation  party  to 
a  note,  bill,  or  cheque  was  likened  in  general  to  that  of  an 
ordinary  surety.  But  the  later  authorities  show 
that  the  likeness  is  not  general ;  they  declare  that  tion  party  as 
an  accommodation  acceptor  or  maker  will  not  be 
discharged  by  any  agreement,  however  valid,  to  extend  the 
time  of  payment  or  to  give  a  discharge  from  liability  to  the 
party  for  whom  the  accommodation  was  given,  where  the  accom- 
modated party  is  liable  under  a  distinct  and  different  kind  of 
contract,  such  as  an  indorsement.  It  makes  no  difference  that 
the  agreement  was  made  with  knowledge  of  the  accommodation, 
at  least  if  the  holder  had  no  notice  of  the  fact  when  he  took  the 
paper.  For  example :  The  defendant  accepts  a  bill  of  exchange 
for  the  accommodation  of  the  drawer,  and  the  plaintiff  becomes 
holder  of  the  bill  in  due  course,  for  value,  and  without  notice  of 
the  accommodation.  Afterwards  he  is  informed  of  the  nature 
of  the  acceptance,  and  later  still  enters  into  a  valid  agreement 

1  Evidence  of  knowledge  of  the  suretyship  may  be  given.  Hitchcock  v. 
Frackelton,  116  Mich.  487.  It  may  be  shown  that  one  of  two  or  more  makers 
of  a  note  signed  as  surety  to  the  holder's  knowledge,  '  not  for  the  purpose  of 
showing  that  the  maker  is  not  liable  as  he  contracted  to  be,  but  to  show  that 
it  would  be  inequitable  to  permit  the  payee  to  vary  the  terms  of  the  contract 
OT  imperil  the  rights  of  the  surety  by  an  extension '  of  time.  Hitchcock  v. 
Frackelton,  supra. 

2  Barron  v.  Cady,  40  Mich.  259. 


268  BILLS,  NOTES,  AND   CHEQUES.        [Chap.  XVIIL 

not  to  sue  the  drawer,  discharging  him  from  liability.  That 
does  not  discharge  the  defendant.^ 

That  proceeds  upon  the  ground  that  the  holder  is  entitled  to 
treat  the  parties  as  liable  according  to  the  contract  which  they 
have  actually  made.  The  plaintiff,  in  such  a  case  as  that  of  the 
example,  has  presumably  bought  the  paper  in  reliance  upon  the 
contracts  as  they  appear  thereon,  and  that  has  given  to  him  a 
right  which  cannot  be  taken  away  without  his  consent.  Con- 
sent he  has  not  given.  Indeed  the  case  would  appear  to  be  the 
same  in  principle,  though  he  had  had  knowledge  of  the  accom- 
modation when  he  bought  the  paper,  for  it  would  still  be  pre- 
sumable that  he  bought  it  relying  upon  the  several  contracts  as 
they  appear  on  the  paper.     And  so  the  modern  authorities  hold.* 

§  6.     Agreement  for  Time  with  Stranger. 

An  agreement  for  time  or  the  like,  if  made  with  one  not  a 
party  to  the  paper,  and  not  with  the  person  in  whose  favor  it  is 
Not  available  made,  would  not  in  any  case,  it  is  held,  have  the 
to  surety.  effect  to  discharge  later  parties.     The  holder  has, 

indeed,  in  such  a  case,  bound  himself  not  to  sue  the  particular 
party  ;  but  that  party  could  not  enforce  the  agreement  or  set  it 
up  in  bar  of  an  action  against  him.* 

§  7.     Ground  of  Doctrine. 

The  doctrines  above  presented  do  not  rest  upon  the  ground 
that  there  was  any  agreement,  express  or  implied,  in  the  orig- 
Equity  or  ^^^^^  contract,  whereby  the  indorser  or  other  party 

Btatute.  ^as  to  be  discharged,  in  case  the  holder  should  do 

any  of  the  things  mentioned.  They  rest  upon  grounds  of  equity 
or  of  statute,  or,  it  may  be,  in  some  instances  of  special  thougli 
doubtful  views  of  the  common  law.  And,  let  it  be  repeated, 
they  apply  in^avor  of  all  persons  secondarily  liable,  within  the 
limitations  stated.  /f^ 

1  Farmers'  Bank  v.  Rathbone,  26  Vt.  19  ;  Cases,  342. 

2  Id. ;  Fentum  v.  Pocock,  5  Taunt.  192  (overruling  Laxton  v.  Peat, 
2  Camp.  185,  and  Collott  v.  Haigh,  3  Camp.  281) ;  Price  v.  Edmonds.  10  B. 
k  C.  578,  584  ;  Nichols  v.  Norris,  3  B.  &  Ad.  41  ;  Harrison  v.  Courtauld,  id. 
36;  3  Kent,  104. 

«  Frazer  v.  Jordan,  8  El.  &  B.  303. 


Sect.  l.J  PAYMENT.  2G9 


CHAPTER  XIX. 

PAYMENT. 

§  1.     General  Rule  :  The  Statute  :  Presumptive 
Payment  :  Surrender. 

Payment  aud  surrender  of  a   negotiable  bill  of  exchange, 
promissory   note,    or  cheque,    made   at   the   right   time,    to   the 
right  person,  by  the  right  person,  will  extinguish  p    •    ,■       , 
the  liability  of  all  parties  to  the  instrument.^   Pay-  entire  instru- 
ment of  an  unnegotiable  bill,  note,  or  cheque  made 
at  any  time,  and  proper  in  other  respects,  has  the  same  effect. 
It  will  not  be  necessary  to  say  anything  more  on  the  subject  in 
regard  to  unnegotiable  instruments. 

The  Statute  puts  the  general  rule  thus :  A  negotiable  instru- 
ment is  discharged  (1)  by  payment  in  due  course  by  or  on 
behalf  of  the  principal  debtor;  (2)  by  payment  in  due  course 
by  the  party  accommodated,  where  the  instrument  is  made  or 
accepted  for  accommodation;  (3)  by  the  intentional  cancellation 
thereof  by  the  holder ;  (4)  by  any  other  act  which  will  dis- 
charge a  simple  contract  for  the  payment  of  money ;   (5)  by  the 

^  Taking  a  bill,  note,  or  cheque  for  debt  should  not  be  confused  with  the 
present  subject.  To  take  a  note  for  debt  suspends  the  remedy  on  the  debt. 
Kearslake  v.  Morgan,  5  T.  R.  513.  Hence  if  the  creditor  sues  for  the  debt, 
and  not  on  the  note,  it  is  for  him  to  show  that  the  note  has  become  unavail- 
able without  his  fault.  See  Harvard  Law  Rev.,  Jan.  1900,  p.  409,  referring 
particularly  to  suit  on  the  original  consideration  of  altered  notes.  See 
Maguire  v.  Eichmeier,  80  N.  W.  R.  395  (Iowa);  Davis  r.  Reilly,  1898,  1 
Q.  B.  1,  bill  of  exchange  given  for  price  of  goods;  Kirkpatrick  v.  Puryear, 
98  Tenn.  409,  413,  that  a  cheque  taken  on  account  is  not  payment  unless 
so  intended. 

Payment  by  the  maker  or  acceptor  will  not  stop  the  Statute  of  Limitations 
from  running  in  favor  of  an  indorser.    Maddox  v.  Duncan,  143  Mo.  613. 


270  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XIX 

principal  debtor  becoming  the  holder  of  the  instrument  at  or 
after  maturity  in  his  own  right. ^  Payment  is  made  in  due 
course  when  it  is  made  at  or  after  maturity  of  the  instrument  to 
the  holder  thereof,  in  good  faith  and  without  notice  that  his 
title  is  defective.^ 

Further,  under  the  Statute  the  holder  may  expressly  renounce 
his  rights  against  any  party  to  the  instrument  before,  at,  or 
after  maturity.^  An  absolute  and  unconditional  renunciation 
of  his  rights  against  the  principal  debtor,  made  at  or  after  the 
maturity  of  the  instrument,  discharges  the  instrument.  But  a 
renunciation  does  not  affect  the  rights  of  a  holder  in  due  course 
without  notice.  The  renunciation  must  be  in  writing,  unless 
the  instrument  is  delivered  up  to  the  person  primarily  liable 
thereon.^ 

Payment  may,  in  certain  cases,  be  shown  by  prima  facie 
presumption.  Thus,  possession  of  paper  after  maturity  raises 
Presumptive  ^  presumption  of  the  kind  towards  parties  seconda- 
payment.  j-ily  liable,  especially  if  the  paper,  with  an  indorse- 

ment upon  it,  18  then  found  in  the  hands  of  and  taken  from  the 
maker  or  acceptor,  or  even  of  the  drawee  of  a  bill  who  had  not 
accepted  it.^  Indeed  between  several  makers  of  a  promissory 
note,  or  acceptors  of  a  bill  of  exchange,  possession  by  one  of 
them  after  maturity  is  prima  facie  evidence  against  the  others 
of  payment  by  him.® 

But  the  presumption,  being  prima  facie,  may  be  rebutted. 
Indeed  the  drawee  of  a  bill  of  exchange  or  a  cheque  may  prove 
to  be  the  holder  of  it,  and  as  such  entitled  to  maintain  an  action 
upon  it;  for,  instead  of  accepting,  he  may  have  discounted  the 
bill.  For  example:  The  plaintiffs,  being  drawees  of  a  bill  of 
exchange  now  sued  upon,  and  bearing  the  indorsement  of  the 
defendants,  discount  it  in  favor  of  the  payees  (defendants)  before 
it  becomes  due,  not  being  bound  to  accept  it.     At  its  maturity 

1  N.  L  L.  §  126.  2  la.  §  95. 

*  See  Edwards  v.  Walters,  1896,  2  Cli.  157.     No  consideration  is  nece.sHary. 
any  more  than  for  striking  out  an  indorsement. 
<  N.  L  L.  §  129. 

5  McGee  v.  Prouty,  9  Met.  547  ;  Eckert  v.  Cameron,  43  Penn.  St.  122 

6  McGee  v.  Prouty,  9  Met.  547. 


Sect.  1.]  PAYMENT.  271 

the  drawer  has  no  funds  in  their  hands,  the  bill  is  dishonored, 
and  the  usual  steps  are  taken  to  fix  the  liability  of  the  defend- 
ants. The  plaintiffs  are  entitled  to  recover;  their  act  of  dis- 
counting the  bill  being  proper,  and  not  amounting  to  a  payment 
of  it.^ 

Unexplained,  however,  an  act  of  that  kind  has  sometimes 
been  looked  upon  prima  facie  as  payment,  extinguishing  the 
liability  of  all  the  parties;  though,  as  will  be  noticed,  the  case 
put  is  one  of  possession  obtained  before  maturity.  According 
to  such  a  rule,  it  would  be  presumed  that  the  paper  mubc  nave 
been  in  the  hands  of  the  drawee,  in  the  ordinary  course  of  busi- 
ness, either  for  acceptance  or  after  payment.'^  Hence,  until  the 
transaction  was  explained,  neither  such  drawee  nor  any  subse- 
quent holder  with  notice  could  be  treated  as  a  holder  in  due 
course.  The  like  rule  would  apply  to  the  maker  of  a  note  or 
the  acceptor  of  a  bill.  But  that  view  has  been  denied,  and  the 
position  taken  that,  though  the  party  primarily  liable,  for  ex- 
ample, the  maker  of  a  note,  offers  the  paper  indorsed  for  dis- 
count, there  is  no  presumption,  from  the  fact  that  the  paper  is 
in  his  hands,  that  it  has  been  paid.  The  proper  inference,  it  is 
thought,  is  that  the  paper  was  indorsed  for  the  accommodation 
of  the  one  offering  it,  and  was  left  in  his  hands  to  enable  him  to 
raise  money  by  it;  at  any  rate  there  would  be  nothing  to  fix 
upon  the  purchaser  notice  of  payment.^  And  that  appears  to  be 
the  true  view. 

While  the  paper  remains  in  the  hands  of  the  maker  or  ac- 
ceptor, however,  such  party  cannot  sue  upon  it,  obviously;  for 
if  he  were  to  recover  on  the  footing  of  an  indorsee  suing  an 
indorser,  the  latter  could  at  once  maintain  an  action  against  him 
in  turn  as  maker  or  acceptor.  But  the  drawee  of  a  bill, 
not  having  accepted,  is  not  in  such  a  position;  he  might  either 
transfer  the  paper,  or,  as  we  have  seen,  sue  upon  it,  after  having 

1  Swope  V.  Ross,  40  Penn.  St.  186  ;  Cases,  361. 

2  Central  Bank  v.  Hammett,  50  N.  Y.  158.  But  see  Witte  v.  Williams, 
8  Rich.  N.  s.  290,  305. 

3  Eckert  v.  Cameron,  43  Penn.  St.  120  ;  Witte  v.  Williams,  supra  ;  Smith 
17.  Weston,  159  N.  Y.  194  ;  Morley  v.  Culverwell,  7  Mees.  &  W.  174  ;  Harmer 
r.  Steele,  4  Ex.  1. 


272  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XIX. 

duly  discounted  it.     The  distinction   then   should   be  noticed 
between  the  purchase  of  paper  and  the  payment  of  it.^ 

Taking  a  new  promissory  note  in  renewal  of  an  old  one,  or  it 
seems  in  renewal  of  liability  upon  any  other  instrument,  amounts 
presumptively  to  payment  or  discharge  of  the  instrument  first 
given,  in  the  absence  of  any  indication  to  the  contrary  in  the 
writings  themselves.  But  the  presumption  is  a  prima  facie  one 
only,  and  hence  may  be  overturned,  as  for  instance  by  evidence 
that  the  understanding  of  the  parties  was  that  there  should  be 
only  an  extension  of  time,  or  by  evidence  of  mistake.^  Hence 
if  the  second  instrument  should  be  invalid,  and  the  first  valid, 
the  holder  it  seems,  by  surrendering  the  second,  would  be  re- 
mitted to  his  rights  upon  the  first.  Indeed  it  has  been  held 
that,  where  the  first  instrument,  being  valid  and  binding,  has 
been  surrendered  and  extinguished,  so  that  the  holder  cannot  be 
restored  to  the  status  quo  ante,  he  may  sue  upon  the  second  one, 
if  to  do  so  would  not  be  wrongful  or  in  violation  of  some  specific 
law. 3 

In  certain  cases  it  appears  to  be  necessary  that  the  payment 
should  be  accompanied  or  directly  followed  by  surrender  of  the 
Surrender  of  instrument,  even  in  cases  in  which  there  could  be 
instrument.  ^o  danger  from  a  further  transfer,  that  is,  even 
though  payment  has  been  made  at  or  after  maturity.  It  appears 
to  be  necessary  sometimes  that  the  maker  or  acceptor  should 
actually  take  up  the  paper  ;  only  by  so  doing  is  he  acting  '  in 
due  course,'  or  according  to  the  law  merchant.     Such  action  is 

1  The  Statute  notices  the  distinction  thus  :  '  Where  the  instrument  is  paid 
by  a  party  .secondarily  liable  thereon,  it  is  not  discharged  ;  but  the  party  so 
paying  it  is  remitted  to  his  former  rights  as  regards  all  prior  parties,'  etc. 
N.  I.  L.  §  128.  See  Hartzell  v.  McClurg,  54  Neb.  316;  Chapi)ell  v.  Mc- 
Keough,  21  Col.  275  ;  Dodger.  Freedmeu's  Savings  Co.,  3  Otto,  379  ;  Harbeck 
V.  Vanderbilt,  20  N.  Y.  395. 

2  In  re  Utica  Brewing  Co.,  154  N.  Y.  268 ;  Lyndonville  Bank  v.  Fletcher, 
68  Vt.  81  (the  renewals  in  this  case  were  forgeries). 

»  Bank  v.  Sneed,  97  Tenn.  120  ;  Wirebaek  v.  First  National  Bank,  97 
Penn.  St.  543  ;  renewal  by  person  now  non  compos.  See  Moulton  v.  Cam- 
roux,  2  Exch,  489,  aff  d  4  Exch.  489  ;  Lancaster  Bank  v.  Moore,  78  Penn. 
St.  407. 


Sect  1.]  PAYMENT.  273 

treated  as  necessary  where  payment  is  made,  at  whatever  time, 
to  one  who,  having  an  apparent  title,  is  not  in  fact  the  true 
ownor,   or  autliorized  to  act  for  the  true  owner.  ^ 

If  in  such  a  case  as  that  payment  is  made  in  good  faith  at 
or  after  maturity,  and  the  instrument  is  surrendered  accord- 
ingly, the  party  paying,  that  is,  the  maker  or  acceptor,  will  he 
discharged,  and  with  him  all  other  parties  to  the  instrument. 
This  proceeds  upon  the  ground  that,  the  instrument  heing 
payahle  to  hearer  originally,  or  afterwards  indorsed  in  blank, 
any  one  in  possession  of  it  is  presumptively  the  owner  ;  hut  as 
it  is  possible  that  the  person  in  possession  may  have  no  right  to 
the  instrument,  the  part}'  paying  should  require  the  paper  to  be 
delivered  up  to  him  as  the  final  assurance  of  his  discharge.  If 
he  should  fail  to  do  so,  taking  instead,  for  instance,  a  receipt 
for  the  money,  with  an  undertaking  for  the  return  of  the  in- 
strument thereafter,  the  true  owner,  any  time  before  such 
return,   could  enforce  another  payment.' 

'  Where  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without  requiring  the 
part  bearing  his  acceptance  to  be  delivered  up  to  him,  and  that  part  at  ma- 
turity is  outstanding  in  the  hands  of  a  holder  in  due  course,  he  is  liable 
thereon  to  the  holder.  N.  I.  L.  §  189.  But  payment  of  any  one  part,  accord- 
ing to  the  law  merchant,  is  i)ayment  of  the  whole.     Id.  §  190. 

*  Upon  this  whole  subject  see  Wheeler  ;;.  Guild,  20  Pick.  545.  In  that 
case  the  payment  was  made  before  maturity,  and  the  decision,  therefore,  is 
not  in  strictness  an  authority  in  respect  of  payment  made  at  or  after  maturity. 
There  may  then  be  some  doubt  upon  the  point.  But  the  language  of  the 
court  is  intended  to  cover  both  cases.  '  If  a  bill,'  said  Shaw,  C.  J.,  '  be  paid 
at  maturity,  in  full,  by  the  acceptor,  or  other  party  liable,  to  a  person  having 
a  legal  title  in  himself  by  indorsement,  and  having  the  custody  and  posses- 
sion of  the  bill  ready  to  surrender,  and  the  party  paying  has  no  notice  of  any 
defect  of  title  or  authority  to  receive,  the  payment  will  be  good.  But  in  both 
cases  faith  is  given  to  the  holder  mainly  on  the  ground  of  his  possession  of  the 
bill  ready  to  be  surrendered  or  delivered,  and  the  actual  surrender  and  deliv- 
ery of  it  upon  the  payment  or  transfer.  If,  therefore,  upon  such  payment  the 
holder  has  not  the  actual  possession  of  the  bill  ready  to  be  delivered,  and  does 
not  in  fact  surrender  it,  but  gives  a  receipt  or  other  evidence  of  the  payment, 
and  if  it  turns  out  that  the  party  thus  receiving  had  not  a  good  right  and  lawful 
authority  to  receive  and  collect  the  money,  but  that  another  person  had  such 
right,  the  payment  will  not  discharge  the  party  paying,  but  will  be  in  his 
own  wrong  ;  he  must  pay  the  bill  again  to  the  right  owner,  and  must  seek  his 
redress  against  the  party  receiving  his  money.'  .  .  . 

18 


274  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XIJC 

§  2.     At  the  Right  Time. 

Payment  then,  in  and  of  itself,  operates  to  discharge  all  par- 
ties only  when  made  at  the  right  time,  which  means  at  or  after 
Payment  be-  maturity.  Payment  may  indeed  be  made  before 
fore  maturity,  maturity,  and  will  operate  as  a  discharge  to  all 
parties  liable  thereon,  against  all  subsequent  holders  who  have 
notice  of  the  fact  ;  or  if  the  paper  is  taken  up,  as  it  should  be, 
and  destroyed,  or  not  afterwards  put  into  circulation  again, 
payment  before  maturity  will  operate  as  a  discharge.  But  the 
paper,  if  njjt  taken  up,  may  wrongfully  be  put  into  circulation 
again  after  such  payment,  and  then  if  it  should  fall  into  the 
hands  of  a  bona  tide  holder  for  value  before  maturity  his  claim 
wouHnot__be,^ffected  by  the  payment.^  This  supposes  that 
payment  is  made  to  the  real  owner  of  the  paper,  or  to  one  au-t 
thorized  to  receive  it  for  him. 

§  3.     To  the  Right  Person. 

In  the  next  place,  the  payment,  to  be  effectual  against  an- 
other demand,  must  be  made  to  the  right  person. '^  All  that 
Paj'ment  to  ap-  ^^^^  means,  however,  is  that,  if  it  is  in  other  re- 
parent  owner,  spects  according  to  law,  it  should  be  made  to  one 
apparently  entitled  to  receive  the  money,  nyt  that  it  must  be 
made  to  the  true  owner.  It  may  be  that  the  person  receiving 
the  money  is  not  entitled  to  it;  he  may  even  have  stolen  the 
instrument  ;  that  will  be  the  misfortune  of  the  owner,  and  he 
must  lose  his  money,  provided  that  the  payment  is  made,  iu 
good  faith,  at  or  after  maturity,  and  is  accompanied  by  a  sur- 
render of  the  paper,  as  we  have  seen.'  But  if  the  maker, 
acceptor,  or  drawee  has  notice  that  the  person  calling  for  pay- 
ment is  not  entitled  to  receive  it,  he  will  pay  at  his  peril.  Pay- 
ment made  to  the  true  owner,  at  or  after  maturity,  extinguishes 
all  liabUitj^  wit];LDut^any-api;render^  the  j^strument. 

1  See  Wheeler  v.  Guild,  20  Pick.  545. 

2  See  Davis  v.  Miller,  14  Gratt.  1. 

•  Wheeler  v.  Guild,  supra.  •  . 


Sect.  4]  PAYMENT.  275 

§  4.     By  the  Right  Person. 

Lastly,   payment  must  be  made  by  the  right  person,  or  on 

the  right  person's  behalf.     The  meaning  of  the  statement  is, 

that  it  should  be  made  by,    or  on   behalf  of,   him   payment  by 

who  is  primarily,  or  in  another  sense  ultimately,   party  primarily 
1        1  TT  r  liable:  '  pav- 

bound  to  pay  and  take  up  the  paper.  Hence  pay-  ment '  by 
ment,'  so-called,  by  the  drawer  of  an  accepted  bill,  '"'i<""«^'"- 
or  Ijy  an  indorser,  to  obtain  his  own  discharge,  is  not  pay- 
ment at  all,  in  the  proper  sense  of  extinguishing  the  paper, 
unless  it  is  further  made  on  behalf  of  the  maker,  acceptor,  or 
drawee.^  Thus  an  acceptor  sued  for  payment  cannot  set  up, 
by  way  either  of  full  or  of  partial  defence,  that  payment,  of 
whatever  amount,  has  been  made  by  the  drawer,  unless  he  can 
further  show  that  the  payment  was  made  in  satisfaction  and 
extinguishment  of  the  bill.^  To  discharge  the  drawer  or  any 
other  party  is  not  to  discharge  the  acceptor. 

That,  however,  supposes  that  tlie  acceptance  was  not  for  the 
drawer's  accommodation.  An  accommodation  party  is  not  the 
one  ultimately  bound  to  take  up  the  paper;  the  party  aq- 
commodated  must  do  that.  Hence  an  acceptor  (or  maker)  for 
accommodation  could  set  up  payment  made  by  the  party  ac- 
commodated, whether  it  was  made  professedly  on  behalf  of 
the  accommodation  party  or  not,'  and  even  though  the  accom- 
modated person  be  not  a  party  to  the  instrument.*  That  pro- 
ceeds upon  the  ground  that  the  accommodation  party  is  only  a 
surety  for  the  party  for  whose  accommodation  he  signed,  and 
that  payment  by  the  principal  debtor  is  payment  by  the  surety 
and  all  others  concerned. 

If  however  the  whole  sum  due  was  paid  by  the  party  accom- 
modated, in  purchasing  his  release,  it  matters  not  whether  the 
holder  to  whom  he  has  paid  it  had  notice  of  his  relation  to  the 
maker  or  acceptor  or  not  ;  not  more  than  nominal  damages  at 
any  rate  could,   thereafter,  be  recovered    against  such   accom 

1  Madison  Square  Bank  i'.  Pierce,  137  N.  Y.  444. 

a  Jones  v.  Broadhurst,  9  C.  B.  173;  Randall  v.  Moon,  12  0.  B.  261. 

3  Cook  V.  Lister,  13  C.  B.  n.  s.  543. 

*  Cottrell  V.  Watkins,  89  Va.  801. 


276  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XIX 

inodating  maker  or  acceptor.  If,  however,  the  accommodated 
party  made  but  part  payment  of  the  sum  due,  the  rest  could  be 
recovered  in  any  case  against  the  maker  or  acceptor,  assuming 
that  such  payment  was  not  made  in  satisfaction  and  dischargft 
of  the  paper.^ 

Payment  in  such  cases,  it  should  be  added,  includes  release 
from  liability.  Thus,  to  release  the  drawer  of  a  bill  for  whose 
accommodation  it  had  been  accepted  would  release  the  acceptor; 
absolutely,  if  it  was  made  on  behalf  of  the  acceptor  or  for  the 
purpose  of  extinguishing  the  bill,  or  to  the  extent  of  the  sum 
paid  for  the  release,  if  it  was  not,  and  the  holder  had  notice  <>f 
the  accommodation.' 

§  5.     Payment  for  Honor. 

Besides  payment   in  the  sense  of  the  forego  dng  paragraphs 

there  may  be  what   is  called  payment  of  bills  of  exchange  for 

,     honor  ;  which  is  a  very  different  thing.     The  prac- 
Not  matter  of        .  '  .  ,        ,  ^        j       i         ••>     z 

custom  in  this    tice  of  intervention   for   honor,   already  aescribed 

country.  where  the  intervention   is  by  way  of  acceptance,* 

does  not  prevail  to  the  extent  of  custom  in  this  country.  On 
the  subject  of  payment  for  honor  the  Statute  makes  the  follow- 
ing provisions :  — 

Where  a  bill  has  been  protested  for  non-payment,  any  person 
may  intervene  and  pay  it  supra  protest  for  the  honor  of  any  per- 
son liable  on  the  instrument,  or  for  the  honor  of 
the  person  for  whose  account  it  was  drawn.* 

The  payment  for  honor  supra  protest,  in  order  to  operate  as 
such  and  not  as  a  mere  voluntary  payment,  must  be  attested  by 
a  notarial  act  of  honor,  which  may  be  appended  to  the  protest 
or  form  an  extension  of  it.^ 

The  notarial  act  of  honor  must  be  founded  on  a  declaration 
made  by  the  person  paying  for  honor  or  by  his  agent  in  that 
behalf,  declaring  his  intention  to  pay  the  bill  for  honor  and 
for  whose  honor  he  pays.® 

J  Cook  V.  Lister,  13  C.  B.  N.  s.  543  ;  Thornton  v.  Maynard,  L.  R.  10  C.  P. 
695.     Further  see  Bigelow's  L.  C.  Bills  and  Notes,  664  et  secj. 
2  See  Farmers'  Bank  v.  Rathbone,  26  Vt.  19  ;  Cases,  342. 
»  Ante.  pp.  7,  61.  *  N.  L  L.  §  178.         &  Id.  §  179.         «  Id.  §  180.^ 


Skct.  5.j  PAYMENT.  277 

Where  two  or  more  persons  offer  to  pay  a  bill  for  the  honor 
of  different  parties,  the  person  whose  payment  will  discharge 
most  parties  to  the  bill  is  to  be  given  the  preference.* 

Where  a  bill  has  been  paid  for  honor,  all  parties  subsequent 
to  the  party  for  whose  honor  it  is  paid  are  discharged,  but  the 
person  paying  for  honor  is  subrogated  for  and  succeeds  to  both 
the  rights  and  duties  of  the  holder  as  regards  the  party  for 
whose  honor  he  pays  and  all  parties  liable  to  the  latter.'^ 

Where  the  holder  of  a  bill  refuses  to  receive  payment  supra 
protest,  he  loses  his  right  of  recourse  against  any  party  who 
would  have  been  discharged  by  such  payment.^ 

The  person  paying  for  honor,  on  paying  to  the  holder  the 
amount  of  the  bill  and  the  notarial  expenses  incidental  to  its 
dishonor,  is  entitled  to  receive  the  bill  itself  and  the  protest.* 

»  N.  I.  L.  §  181.  a  Id.  §  182. 

*  Id.  §  183.  «  Id.  §  184. 

^^y  ^ '  .  £      *  *  ' 

'^ O^-^^U.^^4-  T^-i-w  yCJjL.*ML.^-^   L^-tM^^,^  ^C'^-.^    A^A-Li* -t>i^-U««*- 


?78  BILLS.  NOTES.  AND   CHEQUES.  [Chap.  SJi. 


CHAPTER  XX. 
CONFLICT  OF  LAWS. 

§  1.     General  Doctrine. 

Questions  of  the  conflicting  laws  of  different  States  and 
countries  are  common  enough  to  require  attention  in  a  cou- 
Subjectforcon-  eluding  chapter  of  this  book.  Such  questions  re- 
tenUou  of '  '""  ^^^^  ^0  the  liability  (1)  of  maker  or  acceptor,  (2)  of 
parties.  drawer   or   indorser;   they    will    be    considered    in 

that  order. 

There  is,  however,  a  general  doctrine  of  the  conflict  of  laws, 
applicable  in  one  way  or  another  to  all  the  contracts  of  paper  of 
the  law  merchant,  which  may  be  thus  stated :  The  contract, 
whether  as  a  whole  or  in  part,  is  governed  by  the  law  which 
the  parties  actually  or  presumptively  intended  should  govern,  if 
the  intention  was  not  illegal.^ 

It  should  be  understood,  at  the  same  time,  that  that  is  a  very 
modern  way  of  stating  the  general  doctrine,  a  way  reached  only 
after  much  doubt  and  tentative  effort.  Statements  of  the  law, 
in  the  older  books,  and  now  and  then  in  the  more  recent  ones, 
will  be  found  at  variance  with  it.  But  the  pressure  of  business 
is  strong  towards  freedom  of  contract,  and  it  is  sound  theory  in 
the  law  to  follow  business.  This  idea  has  not  always  prevailed. 
It  has  indeed  been  common  in  the  past  to  say  that  the  law  which 
governs  is  the  lex  loci  contractus,  or,  where  performance  is  to 
be  had  in  another  State  or  country,  the  lex  loci  solutionis;  ^  but 

1  Hamlyn  v.  Tallsker  Distillery,  1894,  A.  C.  202  ;  Law  Quarterly  Rev. 
1894,  pp.  290,  291. 

2  '  Where  a  contract  is  entered  into  between  parties  residing  in  different 
places,  where  different  systems  of  law  prevail,  it  is  a  question,  as  it  appears  to 
me,  in  each  case,  with  reference  to  what  law  the  parties  contracted,  and  ac- 
cording to  what  law  it  was  their  intention  that  their  rights,  either  under  th« 


Sect.  2.]  CONFLICT  OF  LAWS.  279 

that  the  law  of  the  place  where  the  contract  was  made,  or  where 
it  is  to  be  performed,  does  not  always  prevail  is  now  well  set- 
tled.^ That,  in  reality,  is  the  meaning  in  part  of  the  separation 
of  the  subject  into  the  two  branches  above  designated;  different 
rules  prevail,  by  the  better  authorities,  in  regard  to  questions 
of  liability  of  parties  primarily  liable  and  of  parties  secondarily- 
liable. 

§  2.     Maker  or  Acceptor. 

First,  then,  of  the  conflict  of  laws  touching  the  liability  of 
maker  or  acceptor. 

Consider  in  the  first  place  the  question  of  the  plaintiff's  title 
under  an  indorsement  in  another  State  than  that  of  the  holder, 
the  law  of  indorsement  being  different  in  the  two  Various  cases 
States;  which  law  is  to  govern  ?  The  test,  it  P"'- 
seems,  will  be  this :  Did  the  title  pass  by  indorsement  accord- 
ing to  the  law  contemplated,  when  the  indorsement  was  made  ? 
For  example:  A  promissory  note  is  made  by  the  defendant  in 
another  State,  payable  to  the  order  of  A.  A  writes  upon  it  in 
that  State,  '  I  hereby  assign  this  note  to  B,'  signing  his  name, 
which  is  proper  indorsement  there,  but  not  in  the  State  in  which 
suit  is  brought  or  in  which  B  lives.  There  is  no  evidence  that 
A  did  not  intend  to  indorse  according  to  the  law  of  the  State  in 
■which  he  acted.  The  title  is  duly  passed  to  the  plaintifL  Again : 
A  promissory  note  is  made  and  indorsed  abroad,  or  in  some  other 
State  than  that  in  which  the  holder  and  plaintiff  resides  and 
sues,  there  being  a  conflict  of  laws  between  the  two  States,  in 
regard  to  the  holder's  title.  In  such  a  case  presumptively  the 
-law  of  the  State  or  country  in  which  the  indorsement  was  made 
will  govern ;  if  it  was  not  good  b}-^  that  law,  though  it  would  be 

whole  or  any  part  of  the  contract,  should  be  determined.'  Herschel,  L.  C., 
in  Hamlyn  v.  Talisker  Distillery,  supra,  at  p.  207.  The  House  of  Lords  was 
nnanimous  that  the  intention  should  govern  unless  the  intention  was  opposed 
to  the  public  policy  of  the  country  whose  law  was  contemplated  as  governing. 
In  determining  the  intention  both  the  lex  loci  solutionis  and  the  lex  loci  con- 
tractus are  of  importance  ;  but  neither  is  conclusive.  Id.  Further  see  Corbiii 
».  Planters' Bank,  87  Va.  661;  Fant  v.  Miller,  17  Gratt.  47;  Woodrutf  o. 
Bill,  116  Mass.  310. 

1  Hamlyn  v.  Talisker  Distillery,  supra. 


280  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XXI 

good  by  the  domestic  law,  the  plaintiff  will  not  be  entitled  to 


recover.* 


Suppose  that  a  promissory  note  was  made  in  the  State  or 
country  of  the  holder  and  of  the  forum,  and  that  it  is  payable 
there,  but  that  it  has  been  indorsed  abroad,  there  being  the 
same  conflict  of  laws  as  that  last  mentioned.  Now,  the  title  of 
the  plaintiff,  according  to  recent  and  well-considered  authority, 
will  depend  ui^on  the  question  whether  the  indorsement  would 
pass  a  title  by  the  domestic  law.^  That  law  must  naturally  have 
been  the  one  contemplated  by  the  parties;  there  is  nothing  on 
the  face  of  such  an  instrument  to  indicate  that  the  parties  con- 
templated that  it  might  come  under  the  operation  of  foreign 
law ;  it  is  made  and  payable  at  home.  The  fact  that  it  happens 
to  be  in  circulation  in  a  foreign  State  cannot  affect  the  question 
of  the  plaintiff's  title.^ 

Suppose  that  the  note  is  made  abroad,  that  it  is  payable  in  the 
State  of  the  holder,  and  that  it  is  indorsed  by  the  payee  abroad. 
In  that  case  it  is  plain  that  the  parties  contemplated  that  the 
note  would  be  indorsed  abroad,  where  it  was  made;  and  hence 
the  holder  must  have  acquired  title  by  the  foreign  law.  Here, 
in  principle  then,  the  law  of  the  place  of  contract  governs. 

Once  more  suppose  that  the  subject  of  litigation  is  a  bill  of 
exchange,  that  the  bill  was  drawn  abroad,  accepted  and  payable 
in  the  State  of  the  holder,  and  then  indorsed  where  drawn.  That 
makes  a  somewhat  more  complex  question,  and  to  solve  it  cor- 
rectly this  fact  must  be  remembered,  that  the  liability  of  the 
drawer  and  that  of  the  acceptor  go  hand  in  hand;  if  the  drawer 
cannot  be  made  liable,  the  acceptor  could  not  on  payment  charge 
the  sum  against  him.  The  question  then  should  be,  whether 
the  drawer  is  liable  by  the  indorsement,  or  rather  whether  the 
holder  has  acquired  a  title  which  is  good  against  the  drawer  of 

1  Trimbey  v.  Vignier,  1  Bing.  N.  C.  151.  Long  after  this  case  was  de-f 
cided  it  was  found  out  that  the  foreign  law  had  been  mistaken.  Bradlaugh  v. 
De  Rin,  L.  C.  3  C,  P.  538  ;  s.  c.  5  C  P.  473.  But  the  principle  applied  waj« 
correct. 

2  Lebel  v.  Tucker,  L.  R.  3  Q.  B.  77. 

8  Lebel  v.  Tucker,  L.  R.  3  Q.  B.  77,  Lush,  J.  See  Woodruflf  i'.  Hill,  116 
Mass.  310  ;  Everett  v,  Vendryes,  19  N.  Y.  436  ;  Story,  Conflict  of  Laws, 
p.  442,  8th  ed. 


S«CT.  2.]  CONFLICT  OF   LAWS.  281 

the  bill;  and  that  question,  it  is  clear,  must  be  decided  by  th<* 
law  of  the  State  or  country  in  which  the  bill  was  drawn,  unless 
it  appears  that  the  law  of  some  other  country  was  contemplated. 
There  is  nothing  to  indicate  that  any  foreign  law  was  in  mind. 
The  bill  will  probably  be  indorsed  where  it  is  drawn  ;  hence 
the  law  of  the  State  or  country  in  regard  to  the  validity  of  the 
indorsement  will  govern  in  the  suit  against  the  acceptor.^ 

Consider  in  the  next  place  the  question  simply  of  the  liability 
of  the  maker  or  acceptor,  not  of  the  plaintiff's  title,  where  the 
instrument  is  made  payable  in  another  State  than  that  where  it 
was  made  or  accepted.  Now  presumptively  the  law  of  the  place 
of  payment,  the  lex  loci  solutionis,  will  govern.  Greater  weight 
is  given,  on  the  question  of  intention,  to  the  place  of  payment  ; 
and  if  nothing  is  to  be  done  at  the  place  of  making  or  accepting 
the  instrument,  plainly  the  parties  intend  the  place  of  payment, 
and  that  will  govern.^ 

In  regard  to  questions  of  interest,  usury,  and  damages,  in  afi 
action  against  the  maker  or  the  acceptor,  the  law  of  the  State  or 
country  in  which  the  note  or  bill  is  payable  accordingly  governs, 
unless  there  is  indication  that  some  other  law  was  contemplated.* 
The  mere  fact  then  that  the  contract  would,  for  example,  be  usu- 
rious by  the  law  of  the  State  in  which  it  was  made,  would  not 
necessarily  require  the  courts,  even  of  tliat  State,  to  treat  it  as 
usurious ;  the  question  would  everywhere  be  whether  it  was 
usurious  by  the  law  of  the  State  in  which  it  was  made  payable. 
However,  if  it  should  turn  out  that  the  making  the  instrument 
payable  in  some  other  State  than  that  in  which  it  was  made  was 
a  mere  subterfuge  of  the  parties,  to  evade  the  usury  laws  of  their 
own  State,  the  contract  would  be  treated  as  usurious.*  And  it 
has  been  held  that  the  same  would  be  true  in  case  such  contracta 

1  Bradlaugh  v.  De  Rin,  supra. 

2  Hamlyn  v.  Talisker  Distillery,  1894,   A.  C.  202,  208,  212. 

«  Railroad  Co.  v.  Ashland,  12  Wall.  226  ;  Dickinson  v.  Edwards,  77  N.  Y. 
573  ;  Hiberuia  Bank  v.  Lacombe,  84  N.  Y.  .367,  377  ;  Hunt  v.  Hall,  37  Ala. 
702.  In  Massachusetts,  non-stipulated  interest  and  damages  are  treated  as 
matters  of  the  remedy,  and  are  accordingly  governed  by  the  law  of  the  placa 
of  suit,  the  lex  fori.  Ayer  v.  Tilden,  15  Gray,  178.  But  that  is  plainly  wrong. 
Ex  parte  Heidelback,  2  Lowell,  526. 

*  Story,  Confl.  Laws,  pp.  442,  443,  8th  ed. 


282  BILLS,  NOTES,  AND  CHEQUES.  [Chap.  XX. 

were  declared  absolutely  void  by  the  laws  of  the  State  in  which 
they  were  made.^ 

§  3.     Drawer  or  Indorser. 

Kext,  of  the  conflict  of  laws  touching  the  liability  of  drawer 
or  indorser. 

In  regard  to  presentment  and  demand,  the  law  of  the  place  of 
performance  governs  the  question  of  time ;  ^  and  that  because  the 
Presentment  drawer  and  the  indorsers  are  sureties,  in  a  broad 
and  demand.  sense,  for  the  acceptor  and  the  maker.  But  whether 
presentment  and  demand  are  necessary,  in  the  absence  of  waiver, 
and  whether  the  steps  taken,  if  taken  at  the  right  time,  were 
properly  taken,  the  law  of  the  place  of  indorsement  governs.* 

In  regard  to  protest  and  notice,  the  place  of  the  drawing 
or  the  indorsement  furnishes  the  governing  law  upon  a  question 
Protest  and  of  the  necessity  of  these  steps ;  *  while  the  law  of 
^^^^^^'  the  place  of  payment  probably  governs  upon  a  ques- 

tion of  the  mode  of  taking  the  steps  and  of  the  time  of  making 
presentment.  Thus,  in  regard  to  the  first  of  these  questions, 
suppose  a  bill  of  exchange  payable  after  date,  drawn  in  Pennsyl- 
vania to  the  order  of  a  citizen  of  New  York,  payable  in  the  latter 
State,  and  indorsed  by  the  payee,  were  dishonored  on  present- 
ment for  acceptance.  In  such  a  case  it  would  not  be  necessary 
to  notify  the  drawer,  and  it  would  be  useless  to  do  so,  because 
of  the  local  law  of  Pennsylvania;  ^  while  the  contrary  would  be 
true  in  regard  to  the  payee-indorser,  residing  in  New  York,  be- 
cause of  the  general   law  merchant.     In  regard  to  the  second 

1  Akers  v.  Demond,  103  Mass.  318. 

2  Aymar  v.  Sheldon,  12  Wend.  439  ;  Chatham  Bank  v.  Allison,  15  Iowa, 
857  ;  Rouquette  v.  Oveimann,  L.  R.  10  Q.  B.  525.  But  see  Hatcher  v.  Mc- 
Morine,  4  Dev.  122,  124. 

3  Aymar  v.  Sheldon,  supra  ;  Allen  v.  Merchants'  Bank,  22  Wend.  215  ; 
Thorp  V.  Craig,  10  Iowa,  461  ;  Short  v.  Trabue,  4  Met.  (Ky.)  299  ;  Hunt  v. 
Statidart,  15  Ind.  33  (overruling  Shanklin  v.  Cooper,  8  Blackf,  41)  ;  Huse 
V.  Hanihlin,  29  Iowa,  501  ;  Douglas  v.  Bank,  97  Tenn.  133.  But  see  Dunn  v. 
Adams,  1  Ala.  527,  as  to  protest  and  quaere. 

♦  See  Douglas  v.  Bank,  97  Tenn.  133,  demand  and  notice. 
5  Read  u.  Adams,  6  Serg.  &  R.  356.     See  also  Home  u.  Rouquette,  8  Q.  B. 
I;iv.  514." 


SiCT.  3.]  CONFLICT  OF  LAWS.  283 

question  it  will  be  enough  to  say,  for  instance,  that  if  a  deputy 
of  a  notary  public  were  authorized  to  act  by  the  law  of  the  place 
of  payment,  he  might  so  act,  though  it  should  appear  that  by 
the  law  of  the  place  of  indorsement  the  notary  must  act  in  per- 
son ;  and  if  by  the  law  of  the  place  of  payment  four  daj^s  of  grace 
were  allowed,  presentment  must  be  made  on  the  fourth  day,  to 
be  followed  by  the  other  steps  accordingly,  whatever  the  law  of 
the  place  of  indorsement,  for  the  liability  of  the  drawer  and  in- 
dorsers  depends  upon  that  of  the  acceptor  or  maker.  But  the 
time  when  notice  of  dishonor  should  be  given  or  sent  is  governed, 
it  seems,  by  the  law  of  the  place  of  indorsement.^ 

Where  indorsement  is  made  in  a  State  or  a  country  in  which 
the  law  merchant  has  been  changed  or  does  not  prevail,  the  ques- 
tion of  the  liability  of  the  indorser,  otherwise  than  Special  rules 
as  above  considered,  will  be  governed  by  the  law  of  ®^  '*^- 
such  State  or  country.  Thus,  in  some  States  indorsers  are  not 
liable  merely  upon  the  taking  of  the  steps  required  by  the  law 
merchant;  the  holder  must  first  bring  suit  against  the  maker  or 
acceptor,  and  endeavor  to  obtain  payment  from  him,  unless  such 
suit  would  be  useless.  The  law  of  the  place  of  indorsement 
would  govern  in  such  cases.^ 

In  regard  to  the  amount  recoverable  from  a  drawer  or  an 
indorser,  the  fact  that  they  are  looked  upon  as  sureties  of 
the  acceptor  or  maker  indicates  the  extent  of  their  Amount  re- 
liability and  the  governing  law.  The  surety  is  coverable. 
liable  for  the  sum  which  the  principal  debtor  fails  to  pay,  no 
more  and  no  less  ;  and  hence,  in  principle  and  by  the  weight  of 
authority,  the  governing  law  is  the  law  of  the  place  governing 
the  contract  of   the  acceptor  or  maker.'      The  statement  and 

»  Home  V.  Rouquette,  3  Q.  B.  Div.  514,  casting  doubt  upon  Rothschild  v. 
Carrie,  1  Q.  B.  4.3,  49,  a  case  much  cited.     ' 

2  Williams  v.  Wade,  1  Met.  82  ;  Short  v.  Trabue,  4  Met.  (Ky.)  299  ; 
Trabue  v.  Short,  18  La.  An.  257  ;  Trabue  t;.  Short,  5  Cold.  293  ;  Dnndas  v. 
Bowler,  3  McLean,  397,  400.  But  see  CofiFman  v.  Bank  of  Kentucky,  41 
Miss.  212. 

«  Jewell  V.  Wright,  30  N.  Y.  259  ;  Dickinson  v.  Edwards,  77  N.  Y.  573. 
Bee  Kouquette  v.  Overmann,  L.  R.  10  Q.  B.  525  ;  Wayne  Bank  v.   Low,  81 


284  BILLS,  NOTES,  AND   CHEQUES.  [Chap.  XX. 

rulings  sometimes  made  that  the  law  of  the  place  of  indorse- 
ment governs  in  such  a  case  is  believed  to  be  incorrect.^  Pay- 
ment by  the  principal  debtor,  that  is,  of  the  sum  due  by  the  law 
governing  his  own  contract,  will  always  discharge  the  surety. 

§  4.     Procedure  and  Kemedv. 

The  mode  of  procedure,  whether  for  instance  by  attachment 
or  not,  the  jurisdiction  of  the  court,  whether  the  Statute  of 
Lex  fori  Limitations  or  the  Statute  of  Frauds  applies,  these 

governs.  ^^^^  other  questions  of  the  mode  of  procedure  and 

of  the  remedy,  are  governed  by  the  law  of  the  State  in  which 
the  suit  is  brought,  the  lex  fori;  unless  statute  otherwise  pro- 
vides.'^    Intention  plays  no  part  here. 

N.  Y.  566,  570  ;  Hildreth  v.  Shepard,  65  Barb.  269.  Several  cases  contra  in 
New  York  have  been  overruled, 

^  There  are  several  such  decisions,  mostly  however  by  intermediate  courts. 
They  are  founded  more  or  less  upon  Gibbs  v.  Fremont,  9  Ex.  25,  Allen  v. 
Kemble,  6  Moore,  P,  C.  314,  321,  and  Cooper  v.  Waldegrave,  2  Beav.  282, 
285.  Concerning  the  last  named  case  see  the  remarks  of  Cockburn,  C.  J.,  in 
Rouquette  v.  Overmann,  supra.  And  further  see  Story,  Conflict  of  Laws, 
pp.  442,  443,  note,  8th  ed. ;  Bills  of  Exchange  Act,  §  72, 

*  There  has  always  been  more  or  less  doubt  whether  the  defence  of  the 
Statute  of  Limitations  is  a  matter  of  procedure  (or  remedy)  or  of  substantive 
right ;  and  in  many  States  the  bar  of  the  foreign  law  is  a  bar  in  the  State  of 
the  suit,  either  by  statute  or  by  doctrine  as  to  the  nature  of  the  bar.  See 
Collins  0.  Manville,  170  111.  615.  Contra,  Orear  v.  First  National  Bank,  97 
Ga,  587. 


A»T.  1.3  NEGOTIABLE  INSTRUMENTS  LAW.  285 


NEGOTIABLE   INSTRUMENTS  LAW. 

[The  Statute  here  given  is  that  of  New  Yokk.  The  Points  where 
there  are  or  are  likely  to  be  differences  of  legislation  are 
INDICATED.  The  Statute  has  been  collated  with  that  of  Colo- 
rado, AND  THE  Variations  noticed,  by  Way  of  suggesting  Differ- 
ences to  be  looked  for. —  General  Laws  of  New  York,  1897,  chap.  612; 
Laws  of  Colorado,  1897,  chap,  64.] 

ARTICLE   I. 

GENERAL    PROVISIONS. 

§  1.  This  Act  shall  be  known  as  the  Negotiable  Instruments 
Law. 

§  2.    In  this  Act,  unless  the  context  otherwise  requires: 

*  Acceptance '  means  an  acceptance  completed  by  delivery  or 
notification. 

*  Action '  includes  counter-claim  and  set-off. 

'Bank'  includes  any  person  or  association  of  persons  carrying 
on  the  business  of  banking,  whether  incorporated  or  not. 

'Bearer'  means  the  person  in  possession  of  a  bill  or  note 
which  is  payable  to  bearer. 

*  Bill '  means  bill  of  exchange,  and  *  note  '  means  negotiable 
promissor}'^  note. 

'  Delivery  '  means  transfer  of  possession,  actual  or  constructive, 
from  one  person  to  another.^ 

*  Holder  '  means  the  payee  or  indorsee  of  a  bill  or  note,'  who 
is  in  possession  of  it,  or  the  bearer  thereof. 

'Indorsement'  means  an  indorsement  completed  by  delivery. 

*  Instrument '  means  negotiable  instrument. 

*  Issue  '  means  the  first  delivery  of  the  instrument,  complete 
in  form,  to  a  person  who  takes  it  as  a  holder. 

*  Person  '  includes  a  body  of  persons,  whether  incorporated  or 
not. 

'  Value  '  means  valuable  consideration. 

*  Written  '  includes  printed,  and  '  writing  '  includes  print. 

*  See  ante,  p.  13-  '  Why  not  cheque  also  ? 


^ 


286  BILLS,  NOTES,  AND   CHEQUES.  [Art  U 

§  3.  The  person  'primarily'  liable  on  an  instrument  is  the 
person  who  by  the  terms  of  the  instrument  is  absolutely  re- 
quired to  pay  the  same.  All  other  persons  are  '  secondarily  ' 
liable. 

§  4.  In  determining  what  is  a  '  reasonable  time '  or  an  '  unrea- 
sonable time  '  regard  is  to  be  had  to  the  nature  of  the  instrument, 
the  usage  of  trade  or  business  (if  any)  with  respect  to  such  in- 
struments, and  the  facts  of  the  particular  case. 

§  5.  Where  the  day,  or  the  last  day,  for  doing  any  act  herein 
required  or  permitted  to  be  done  falls  on  Sunday  or  on  a  holiday, 
the  act  may  be  done  on  the  next  succeeding  secular  or  business 
day. 

§  6.  The  provisions  of  this  Act  do  not  apply  to  negotiable 
instruments  made  and  delivered  prior  to  the  passage  hereof.^ 

§  7.  In  any  case  not  provided  for  in  this  Act  the  rules  of  the 
law  merchant  shall  govern. 


ARTICLE   II. 

FORM    AND    INTERPRETATION. 

I  ^  \JoLt     §  ®-    -^^  instrument  to   be  negotiable   must  conform  to  the 
following  requirements :  — 

1.  It  must  be  in  writing  and  signed  by  the  maker  or  drawer. 

2.  Must  contain  an  unconditional  promise  or  order  to  pay  a 
sum  certain  in  money. 

3.  Must  be  payable  on  demand,  or  at  a  fixed  or  determi- 
nable future  time. 

4.  Must  be  payable  to  order  or  to  bearer;  and 

5.  Where  the  instrument  is  addressed  to  a  drawee,  he 
must  be  named  or  otherwise  indicated  therein  with  reasonable 
certainty. 

§  9.  The  sum  payable  is  a  sum  certain  within  the  meaning  of 
this  Act,  although  it  is  to  be  paid: 

1.  With  interest;  or 

2.  By  stated  instalments;  or 

1  Colorado  Statute,  '  Prior  to  the  taking  effect  of  this  Act.'     §  195. 


Abt.  II.]  NEGOTIABLE   INSTRUMENTS  LAW.  28T 

3.  By  stated  instalments,  with  a  provision  that  upon  default 
in  payment  of  any  instalment  or  of  interest  the  whole  shall  be'- 
come  due;   or 

4.  With  exchange,  whether  at  a  fixed  rate  or  at  the  current 
rate;  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case  pay- 
ment shall  not  be  made  at  maturity. 

§  10.  An  unqualified  order  or  promise  to  pay  is  unconditional 
within  the  meaning  of  this  Act,  though  coupled  with: 

1.  An  indication  of  a  particular  fund  out  of  which  reim- 
bursement is  to  be  made,  or  a  particular  account  to  be  debited 
with  the  amount;  or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the 
instrument. 

But  an  order  or  promise  to  pay  out  of  a  particular  fund  is  not 
unconditional. 

§  11.  An  instrument  is  payable  at  a  determinable  future  time, 
within  the  meaning  of  this  Act,  which  is  expressed  to  be  payable-: 

1.  At  a  fixed  period  after  date  or  sight;   or 

2.  On  or  before  a  fixed  or  determinable  future  time  specified 
therein;  or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a  specifi.ed 
event  which  is  certain  to  happen,  though  the  time  of  happening 
be  uncertain.  .  ,;  • 

An  instrument  payable  upon  a  contingency  is  not  negotiable, 
and  the  happening  of  the  event  does  not  cure  the  defect. 

§  12.  An  instrument  which  contains  an  order  or  promise  to 
do  any  act  in  addition  to  the  payment  of  money  is  not  negoti- 
able. But  the  negotiable  character  of  an  instrument  otherwise 
negotiable  is  not  affected  by  a  provision  wliich: 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the 
instrument  be  not  paid  at  maturity ;  or 

2.  Authorizes  a  confession  of  judgment  if  the  instrument  be 
not  paid  at  maturity ;  or 

3.  Waives  the  benefit  of  any  law  intended  for  the  advantage 
or  protection  of  the  obligor;   or 

4.  Gives  the  holder  an  election  to  require  something  to  b« 
done  in  lieu  of  payment  of  money. 


288  BILLS,  NOTES,  AND   CHEQUES.  [Aet.  II 

But  nothing  in  this  section  shall  validate  any  provision  or 
stipulation  otherwise  illegal. 

§  13.  The  validity  and  negotiable  character  of  an  instrument 
are  not  affected  by  the  fact  that :  —  ^ 

1.  It  is  not  dated;  or  ^  2^  "f  HaUp-^*^  3      ^  I  t 

2.  Does  not  specify  the  value  given,  or  that  any  value  has 
been  given  therefor;  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the  place 
where  it  is  payable;  or 

4.  Bears  a  seal;  or 

5.  Designates  a  particular  kind  of  current  money  in  which 
payment  is  to  be  made. 

But  nothing  in  this  section  shall  alter  or  repeal  any  statute 
requiring  in  certain  cases  the  nature  of  the  consideration  to  be 
etated  in  the  instrument. 

§  14.   An  instrument  is  payable  on  demand: 

1.  Where  it  is  expressed  to  be  payable  on  demand,  or  at 
eight,^  or  on  presentation;  or 

2,  In  which  no  time  for  payment  is  expressed. 

Where  an  instrument  is  issued,  accepted,  or  indorsed  when 
■overdue,  it  is,  as  regards  the  person  so  issuing,  accepting,  or  in- 
dorsing it,  payable  on  demand. 

§  15.  The  instrument  is  payable  to  order  where  it  is  drawn 
payable  to  the  order  of  a  specified  person,  or  to  him  or  his  order. 
It  may  be  drawn  payable  to  the  order  of: 

1.  A  payee  who  is  not  maker,  drawer,  or  drawee;  or 

2.  The  drawer  ^  or  maker ;  or 

3.  The  drawee ;  or 

4.  Two  or  more  payees  jointly;  or 

5.  One  or  some  of  several  payees  ;  or      ^  •  Ik  ^ 

6.  The  holder  of  an  office  for  the  time  being. 

Where  the  instrument  is  paj^able  to  order,  the  payee  must  be 
Bamed  or  otherwise  indicated  therein  with  reasonable  certainty. 
§  16.    The  instrument  is  payable  to  bearer: 
1.   When  it  is  expressed  to  be  so  payable ;  or 

1  But  see  Mass.  Stats.  1899,  chap.  130. 

2  The  statute  originally  read  'drawee.'  Amendment,  1898,  chap.  336, 
|2L 


Abt.  Il.J  NEGOTIABLE   INSTRUMENTS  LAW.  289 

2.  When  it  is  payable  to  a  person  named  therein  or  bearer } 
or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or  non-exist- 
ing person,  and  such  fact  was  known  to  the  person  making  it  so 
payable;  or 

4.  When  the  name  of  the  payee  does  not  purport  to  be  the 
ame  of  any  person  ;  or 

5.  When  the  only  or  last  indorsement  is  an  indorsement  in 
blank.        f.VW*CX^.wV--l^ «-^^^HI    ♦3--«q^^ 

17.  The  instrument  need  not  follow  the  language  of  this^lW***'*^ 
Act,  but  any  terms  are  sufficient  which  clearly  indicate  an  inten- c^f^^H***^ 
tion  to  conform  to  the  requirements  hereof.  //"rT"*^*'*^ 

§  18.  Where  the  instrument  or  an  acceptance  or  any  indorse-iit^Mu*  /* 
ment  thereon  is  dated,  such  date  is  deemed  prima  facie  to  be  thot^^y*^**^ 
true  date  of  the  making,  drawing,  acceptance  or  indorsement,  aa^ft^/^ 
the  case  may  be.    "    .     »      »    «    .   «     ,'*'♦    ;'»     •     '      '   *'     '.  r' 


4^^ 


-  -  rf' 


§  19.    The  instrufnelnt  is  fiot*inva;lid  for  the  reason  only  that  >.      , 
it  is  antedated  or  postdated,  provided  this  is  not  done  for  an  il-y***X 
legal  or  fraudulent  purpose.    The  person  to  whom  an  instrument^*^^^** 
so  dated  is  delivered  acquires  the  title  thereto  as  of  the  date  of    P^^*^ 
delivery.  ^ZZ  ^    . 

§  20.    Where  an  instrument  expressed  to  be  payable  at  a  fixed       ^^  *** 
period  after  date  is  issued  undated,  or   where    the   acceptance ^*'*^*''^^ 
of  an  instrument  payable  at  a  fixed  period  after  sight  is  un-  '^'*f"*'"** 
dated,  any  holder  may  insert  therein  the  true  date  of  issue  or    |4/***-  ^ 
acceptance,  and  the  instrument  shall   be  payable   accordingly. 
The  insertion  of  a  wrong  date  does  not  avoid  the  instrument  in 
the  hands  of  a  subsequent  holder  in  due  course;  but  as  to  him, 
the  date  so  inserted  is  to  be  regarded  as  the  true  date. 

§  21.  Where  the  instrument  is  wanting  in  any  material  par- 
ticular, the  person  in  possession  thereof  has  a  prima  facie  author- 
ity to  complete  it  by  filling  up  the  blanks  therein.  And  a 
signature  on  a  blank  paper  delivered  by  the  person  making  the 
signature  in  order  that  the  paper  may  be  converted  into  a  nego- 
tiable instrument  operates  as  a  prima  facie  authority  to  fill  it  up 
as  such  for  any  amount.  In  order  however  that  any  such  in- 
strument, when  completed,  may  be  enforced  against  any  person 
who  became  a  party  thereto  prior  to  its  completion,  it  must  be 

19 


290  BILLS,  NOTES,  AND  CHEQUES.  [Art.  II, 

filled  up  strictly  in  accordance  with  the  authority  given  and 
within  a  reasonable  time.  But  if  any  such  instrument,  after 
completion,  is  negotiated  ^  to  a  holder  in  due  course,  it  is  valid 
and  effectual  for  all  purposes  in  his  hands,  and  he  may  enforce 
it  as  if  it  had  been  filled  up  strictly  in  accordance  with  the  au- 
thority given  and  within  a  reasonable  time. 

§  22.  Where  an  incomplete  instrument  has  not  been  deliv- 
ered, it  will  not,  if  completed  and  negotiated,  without  authority, 
be  a  valid  contract  in  the  hands  of  any  holder  as  against  any 
person  whose  signature  was  placed  thereon  before  delivery. 

§  23.  Every  contract  on  a  negotiable  instrument  is  incam- 
j)lete  and  revocable  until  delivery  of  the  instrument  for  the  pur- 
j)0se  of  giving  effect  thereto.  As  between  immediate  parties, 
and  as  regards  a  remote  party  other  than  a  holder  in  due  course, 
the  delivery,  in  order  to  be  effectual,  must  be  made  either  by  or 
under  the  authority  of  the  party  making,  drawing,  accepting,  or 
indorsing,  as  the  case  may  be ;  and  in  such  case  the  delivery 
may  be  shown  to  have  been  conditional,  or  for  a  special  purpose 
only,  and  not  for  the  purpose  of  transferring  the  property  in  the 
instrument.  But  where  the  instrument  is  in  the  hands  of  a 
holder  in  due  course,  a  valid  delivery  thereof  by  all  parties 
prior  to  him  so  as  to  make  them  liable  to  him  is  conclusively 
])resumed.^  And  where  the  instrument  is  no  longer  in  the  pos- 
session of  a  party  whose  signature  appears  thereon,  a  valid  and 
intentional  delivery  by  him  is  presumed  until  the  contrary  is 
proved. 

§  24.  Where  the  language  of  the  instrument  is  ambiguous, 
or  there  are  omissions  therein,  the  following  rules  of  construc- 
tion apply :  — 

1.  Where  the  sum  payable  is  expressed  in  words  and  also  in 
figures,  and  there  is  a  discrepancy  between  the  two,  the  sum 
denoted  by  the  words  is  the  sum  payable  ;  but  if  the  words  are 
ambiguous  or  uncertain,  reference  may  be  had  to  the  figures  to 
fix  the  amount. 

2.  Where  the  instrument  provides  for  the  payment  of   inter- 

1  Amendment,  1898,  ch.  336,  §  4,  for  'negotiable.' 

2  After  '  valid  delivery  thereof  the  words  '  if  any '  or  the  like  should  havo 
been  inserted.     Or  emphasize  '  valid.*     See  ante,  p.  13  .  r 


Art.  II.]  NEGOTIABLE   INSTRUMENTS  LAW.  291' 

est,  without  specifying  the  date  from  which  interest  is  to  run, 
the  interest  runs  from  the  date  of  the  instrument,  and  if  the  in-r 
Btrument  is  undated,  from  the  issue  thereof. 

3.  Where  the  instrument  is  not  dated,  it  will  be  considered 
to  be  dated  as  of  the  time  it  was  issued.  ^  I  3  (|} 

4.  Where  there  is  a  conflict  between  the  written  and  printed 
provisions  of  the  instrument,  the  written  provisions  prevail. 

5.  Where  the  instrument  is  so  ambiguous  that  there  is  doubt 
whether  it  is  a  bill  or  note,  the  holder  may  treat  it  as  either  at 
his  election.^ 

6.  Where  a  signature  is  so  placed  upon  the  instrument  that 
it  is  not  clear  ii>  what  capacity  the  person  making  the  same  in- 
tended to  sign,  he  is  to  be  deemed  an  indorser. 

7.  Where  an  instrument  containing  the  words  '  I  promise  to 
pay  '  is  signed  by  two  or  more  persons,  they  are  deemed  to  be 
jointly  and  severally  liable  thereon. 

§  25.  No  person  is  liable  on  the  instrument  whose  signature 
does  not  appear  thereon,  except  as  herein  otherwise  expressly 
provided.  But  one  who  signs  in  a  trade  or  assumed  name  will 
be  liable  to  the  same  extent  as  if  he  had  signed  in  his  own 
name. 

§  26.  The  signature  of  any  party  may  be  made  by  a  duly  au- 
thorized agent.  No  particular  form  of  appointment  is  necessary 
for  this  purpose ;  and  the  authority  of  the  agent  may  be  estab- 
lished as  in  other  cases  of  agency. 

§  27.    Where  the  instrument  contains  or  a  person  adds  to  his 
signature  words   indicating   that  he  signs«^or  on  behalfof^  .^^^  fV*^*-"* 
principal,  or  in  a  representative   capacity,  he  is  nofliable   on*  0^  < 

the  instrument  if  he  was  duly  authorized;  ^  but  the  mere  ad- 
dition of  words  describing  him  as  an  agent,  or  as  filling  a  repre- 
sentative character,  without  disclosing  his  principal,  does  not 
exempt  him  from  personal  liability. 

§  28.    A  signature  by   '  procuration '  operates  as  notice  that 

1  A  bill  of  exchange  drawn  upon  the  drawer  is,  in  legal  efifect,  a  promis- 
sory note.     Davis  v.  Clarke,  6  Q.  B.  16  ;  Cases,  45,  47  ;  ante,  p.  51,  note  1. 

*  Qu.  whether,  in  virtue  of  the  words  'if  he  was  duly  authorized,'  the 
agent  is  liable  on  the  instrument,  where  he  was  not  authorized  ?  The  statute.- 
Jeaves  a  doubt  where  there  was  none  befor«. 


292  BILLS,  NOTES,  AND   CHEQUES.  [Art.  Ill 

the  agent  has  but  a  limited  authority  to  sign,  and  the  principal 
is  bound  only  in  case  the  agent  in  so  signing  acted  within  the 
actual  limits  of  his  authority.^ 

§  29.  The  indorsement  or  assignment  of  the  instrument  by 
a  corporation  or  by  an  infant  passes  the  property  therein,  not- 
withstanding that  from  want  of  capacity  the  corporation  or  in- 
fant may  incur  no  liability  thereon. 

§  30.  Where  a  signature  is  forged  or  made  without  authority 
of  the  person  whose  signature  it  purports  to  be,  it  is  wholly  in- 
operative, and  no  right  to  retain  the  instrument,  or  to  give  a 
discharge  therefor,  or  to  enforce  payment  thereof  against  any 
party  thereto,  can  be  acquired  through  or  under  such  signature, 
unless  the  party  against  whom  it  is  sought  to  enforce  such  right 
is  precluded  from  setting  up  the  forgery  or  want  of  authority. 


ARTICLE   III. 

CONSIDERATION    OF   NEGOTIABLE    INSTRUMENTS. 

§  31.  Every  negotiable  instrument  is  deemed  prima  facie  to 
have  been  issued  for  a  valuable  consideration ;  and  every  person 
whose  signature  appears  thereon  to  have  become  a  party  thereto 
for  value. 

§  32.  Value  is  any  consideration  sufficient  to  support  a  simple 
contract.  An  antecedent  or  pre-existing  debt  constitutes  value,'* 
and  is  deemed  such  whether  the  instrument  is  payable  on  de- 
mand or  at  a  future  time. 

§  33.  Where  value  has  at  any  time  been  given  for  the  instru- 
ment, the  holder  is  deemed  a  holder  for  value  in  respect  to  all 
parties  who  became  such  prior  to  that  time. 

§  34.  Where  the  holder  has  alien  on  the  instrument,  arising 
either  from  contract  or  by  implication  of  law,  he  is  deemed  a 
holder  for  value  to  the  extent  of  his  lien. 

§  35.  Absence  or  failure  of  consideration  is  matter  of  defence 
as  against  any  person  not  a  holder  in  due  course;  and  partial 

'  There  is  probably  no  custom  in  this  country  of  signing  '  per  procura- 
tionem.'    On  legislation  in  advance  of  custom,  see  ante,  p.  7. 

^  Differences  in  tlie  statutes  should  be  looked  for  here.    Ante,  pp.  2i2-2i7. 


ABT.  IV.]  NEGOTIABLE   INSTRUMENTS   LAW.  293 

failure  of  consideration  is  a  defence  pro  tanto,  whether  the  fail- 
ure IS  an  ascertained  and  liquidated  amount  or  otherwise. 

§  36.  An  accommodation  party  is  one  who  has  signed  the  in- 
strument as  maker,  drawer,  acceptor,  or  indorser,  without  re- 
ceiving value  therefor,  and  for  the  purpose  of  lending  his  name 
to  some  other  person.  Such  a  person  is  liable  on  the  instrument 
to  a  holder  for  value,  notwithstanding  such  holder  at  the  time 
of  taking  the  instrument  knew  him  to  be  only  an  accommoda- 
tion party. 

ARTICLE   IV. 

NEGOTIATION. 

§  37.  An  instrument  is  negotiated  when  it  is  transferred 
from  one  person  to  another  in  such  manner  as  to  constitute  the 
transferee  the  holder  thereof.  If  payable  to  bearer,  it  is  nego- 
tiated by  delivery ;  if  payable  to  order,  it  is  negotiated  by  the 
indorsement  of  the  holder  completed  by  delivery.^-3  *   5-*"^^ 

§  38.  The  indorsement  must  be  written  on  the  instrument 
itself,  or  upon  a  paper  attached  thereto.     The  signature  of  the  ^ 

indorser,  without  additional  words,  is  a  sufficient  indorsement.  S^\  ^ 

§  39.  The  indorsement  must  be  an  indorsement  of  the  entire 
instrument.^  An  indorsement  which  purports  to  transfer  to  the 
indorsee  a  part  only  of  the  amount  payable,  or  which  purport.s 
to  transfer  the  instrument  to  two  or  more  indorsees  severally, 
does  not  operate  as  a  negotiation  of  the  instrument.  But  where 
the  instrument  has  been  paid  in  part,  it  may  be  indorsed  as  to  -, 

the  residue.  C)  H-V   '?*^.^ jt***»^^ ^^^ *►  ^  aJ!rm/if*^ 

§  40.     An  indorsement  may  be  either  special  or  in  blank;  and^,  ^^   ^ 
it  may  also  be  either  restrictive,  or  qualified,  or  conditional. 

§  41.  A  special  indorsement  specifies  the  person  to  whom  or 
to  whose  order  the  instrument  is  to  be  payable;  and  the  indorse- 
ment of  such  indorsee  is  necessary  to  the  further  negotiation  of 
the  instrument.  An  indorsement  in  blank  specifies  no  indorsee, 
and  an  instrument  so  indorsed  is  payable  to  bearer,  and  may  be 
negotiated  by  delivery.^  ^  f^  C^V**-f  -  ^  ^^  ^O'  4~* 

§  42.     The  holder  may  convert  a  blank  indorsement   into  a 

*  See  ante,  p.  90,  as  to  partial  indorsement  by  accommodatirm  parties. 


204  BILLS,  NOTES,  AND  CHEQUES.  [Art.  IV 

special  indorsement  by  writing  over  the  signature  of  the  in- 
dorser  in  blank  any  contract  consistent  with  the  character  of 
-the   indorsement. 

§  43.     An  indorsement  is  restrictive,  which  either: 

1.  Prohibits  the  further  negotiation  of  the  instrument ;  or 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser  ;  or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of 
some  other  person. 

But  the  mere  absence  of  words  implying  power  to  negotiate 
does  not  make  an  indorsement  restrictive. 

§  44.  A  restrictive  indorsement  confers  upon  the  indorsee 
the  right: 

1.  To  receive  payment  of  the  instrument. 

2.  To  bring  any  action  thereon  that  the  indorser  could 
bring. 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form  of 
the  indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of  the  first 
indorsee  under  the  restrictive  indorsement. 

§  45.  A^  qualified  indorsement  constitutes  the  indorser  a 
mere  assignor  of  the  title  to  the  instrument.  It  may  be  made  by 
adding  to  the  indorser's  signature  the  words  '  without  recourse,' 
or  any  words  of  similar  import.  Such  an  indorsement  does  not 
impair  the  negotiable  character  of  the  instrument.   (J  ^-L 

§  46.  Where  an  indorsement  is  conditional,  a  party  required 
to  pay  the  instrument  may  disregard  the  condition,  and  make 
payment  to  the  indorsee  or  his  transferee,  whether  the  condi- 
tion has  been  fulfilled  or  not.  But  any  person  to  whom  an  in- 
strument so  indorsed  is  negotiated  will  hold  the  same,  or  the 
proceeds  thereof,  subject  to  the  rights  of  the  person  indorsing 
conditionally. 

§  47.  Where  an  instrument  payable  to  bearer  is  indorsed 
Specially,  it  may  nevertheless  be  further  negotiated  by  deliv- 
ery; but  the  person  indorsing  specially  is  liable  as  indorser  to 
only  such  holders  as  make  title  through  his  indorsement.^W.6[)^#-^3t"« 

^  48.     Where  an  instrument  is  payable  to  the  order  of  two 

1  Amendment  1898,  chap.  336,  §  8. 


Art.  I  v.]  negotiable  INSTRUMENTS  LAW.  295 

or  more  payees  or  indorsees  who  are  not  partners,  all  must  in- 
dorse, unless  the  one  indorsing  has  authority  to  indorse  for 
the  others,   y  3  ^ 

§  49.  Where  an  instrument  is  drawn  or  indorsed  to  a  per- 
son as  '  cashier  '  or  other  fiscal  officer  of  a  bank  or  corporation,  it 
is  deemed  prima  facie  to  be  payable  to  the  bank  or  corporation 
of  which  he  is  such  officer,  and  may  be  negotiated  by  either  the 
indorsement  of  the  bank  or  corporation  or  the  indorsement  of 
the  officer. 

§  50.  Where  the  name  of  a  payee  or  indorsee  is  wrongly 
designated  or  misspelled,  he  may  indorse  the  instrument  as 
therein  described,  adding,  if  he  think  fit,  his  proper  signature. 

§  51.  Where  any  person  is  under  obligation  to  indorse  in  a 
representative  capacity,  he  may  indorse  in  such  terms  as  to  neg- 
ative personal  liability. 

§  52.  Except  where  an  indorsement  bears  date  after  the  ma- 
turity of  the  instrument,  every  negotiation  is  deemed  prima 
facie  to  have  been  effected  before  the  instrument  was  overdue. 

§  53.  Except  where  the  contrary  appears,  every  indorsement 
is  presumed  prima  facie  to  have  been  made  at  the  place  where 
the  instrument  is  dated. 

§  54.  An  instrument  negotiable  in  its  origin  continues  to  be 
negotiable  until  it  has  been  restrictively  indorsed  or  discharged 
by  payment  or  otherwise. 

§  55.  The  holder  may  at  any  time  strike  out  any  indorsement 
which  is  not  necessary  to  his  title.  The  indorser  whose  indorse- 
ment is  struck  out,  and  all  indorsers  subsequent  to  him,  are 
thereby  relieved  from  liability  on  the  instrument,  qo  !*(]>;)  V/-V*-' 4^? 

§  56.  Where  the  holder  of  an  instrument  payable  to  his  order 
transfers  it  for  value  without  indorsing  it,  the  transfer  vests  in 
the  transferee  such  title  as  the  transferrer  had  therein,  and  the 
transferee  acquires,  in  addition,  the  right  to  have  the  indorse- 
ment of  the  transferrer.^     But  for  the  purpose  of  determining 

^  Sed  qu.  of  the  right  to  have  indorsement,  except  upon  proof  that  sucli 
was  the  actual  intention.  See  ante,  p.  85,  note.  Perhaps  there  may  be  aright 
to  indorsement  without  recourse  or  warranty,  so  as  to  give  tlie  transferee  legal 
title  ;  but  even  that  is  doubtful.  The  Colorado  Statute  rightly  adds,  '  ii 
omitted  by  mistake,  accident,  or  fraud.'     Chap.  64,  §  49,  Laws  1897. 


296  BILLS,  NOTES,  AND   CHEQUES.  [Abx.  V. 

whether  the  transferee  is  a  holder  in  due  course  the  negotiation 
takes  effect  as  of  the  time  when  the  indorsement  is  actually 
made. 

§  57.  Where  an  instrument  is  negotiated  back  to  a  prior 
party,  such  party  may,  subject  to  the  provisions  of  this  Act, 
reissue  and  further  negotiate  the  same.  But  he  is  not  entitled 
to  enforce  payment  thereof  against  any  intervening  party  to 
whom  he  was  personably  liable. 

AKTICLE   V. 

RIGHTS    OF    HOLDER. 

§  58.  The  holder  of  a  negotiable  instrument  may  sue  thereon 
in  his  own  name;  and  payment  to  him  in  due  course  discharges 
the  instrument. 

§  59.  A  holder  in  due  course  is  a  holder  who  has  taken  the 
instrument  under  the  following  conditions  :  — 

1.  That  it  is  complete  ^  and  regular  upon  its  face; 

2.  That  he  became  the  holder  of  it  before  it  was  overdue,  and 
without  notice  that  it  had  been  previously  dishonored,  if  such 
was  the  fact; 

3.  That  he  took  it  in  good  faith  and  for  value; 

4,  4.  That  at  the  time  it  was  negotiated  to  him  he  had  no  notice 
of  any  infirmit}'  in  the  instrument  or  defect  in  the  title  of  the 
person  negotiating  it.   in^  **^   ^  ^  *""  ^  / 

§  60.  Where  an  instrument  payable  on  demand  is  negotiated 
an  unreasonable  length  of  time  after  its  issue,  the  holder  is  not 
deemed  a  holder  in  due  course. 

§  61.  Where  the  transferee  receives  notice  of  any  infirmity 
in  the  instrument  or  defect  in  the  title  of  the  person  negotiating 
the  same  before  he  has  paid  the  full  amount  agreed  to  be  paid 
therefor,  he  will  be  deemed  a  holder  in  due  course  only  to  the 
extent  of  the  amount  theretofore  paid  by  him. 

§  62.  The  title  of  a  person  who  negotiates  an  instrument 
is  defective  within  the  meaning  of  this  Act  when  he  obtained  the 
instrument,  or  any  signature  thereto,  by  fraud,  duress,  or  force 

1  The  instrument  is  '  complete,'  in  the  sense  of  a  completed  contract,  only 
after  delivery.     Ante,  p.  13. 


Art.  VI.]  NEGOTIABLE   INSTRUMENTS  LAW.  297 

and  fear,  or  other  unlawful  means,  or  for  an  illegal  consideration, 
or  when  he  negotiates  it  in  breach  of  faith  or  under  such  circum- 
stances as  amount  to  a  fraud. 

§  63.  To  constitute  notice  of  an  infirmity  in  the  instrument 
or  defect  in  the  title  of  the  person  negotiating  the  same,  the  per- 
son to  whom  it  is  negotiated  must  have  had  actual  knowledge  of 
the  infirmity  or  defect,  or  knowledge  of  such  facts  that  his  action 
in  taking  the  instrument  amounted  to  bad  faith. ^'^  V^   C^J 

§  64.  A  holder  in  due  course  holds  the  instrument  free  from 
any  defect  of  title  of  prior  parties  and  free  from  defences  avail- 
able to  prior  parties  among  themselves,  and  may  enforce  pay- 
ment of  the  instrument  for  the  full  amount  thereof  against  all 
parties  liable  thereon.  ^  te  -^_£-  -i.  j.  -  vl  3— '3  o 

§  65.  In  the  hands  of  any  holder  other  than  a  holder  in  due 
course  a  negotiable  instrument  is  subject  to  the  same  defences  as 
if  it  were  non-negotiable.  But  a  holder  who  derives  his  title 
through  a  holder  in  due  course,  and  who  is  not  himself  a  party 
to  any  fraud  or  illegality  affecting  the  instrument,  has  all  the 
rights  of  such  former  holder  in  respect  of  all  parties  prior  to  the 
latter. 

§  66.  Every  holder  is  deemed  prima  facie  to  be  a  holder  in 
due  course ;  but  when  it  is  shown  that  the  title  of  any  person 
who  has  negotiated  the  instrument  was  defective,  the  burden  is 
on  the  holder  to  prove  that  he  or  some  person  under  whom  he 
claims  acquired  the  title  in  due  course.  But  the  last  mentioned 
rule  does  not  apply  in  favor  of  a  party  who  became  bound  on 
the  instrument  prior  to  the  acquisition  of  such  defective  title. 

ARTICLE   VI. 

LIABILITY    OF    PARTIES. 

§  67.  The  maker  of  a  negotiable  instrument,  by  making  it, 
engages  that  he  will  pay  it  according  to  its  tenor,  and  admits 
the  existence  of  the  payee  and  his  then  capacity  to  indorse. 

§  68.  The  drawer,  by  drawing  the  instrument,  admits  the 
existence  of  the  payee  and  his  then  capacity  to  indorse,  and 
engages  that  on  due   presentment  the    instrument  will    be  ac- 

1  The  statutes  may  differ  here.     See  ante,  pp.  233-237. 


298  BILLS,  NOTES,  AND   CHEQUES.  [Art.  VI 

cepted  aud  ^  paid,  or  both,  according  to  its  tenor,  and  that  if  it  be 
dishonored,  and  the  necessary  proceedings  on  dishonor  be  duly 
taken,  lie  will  pay  the  amount  thereof  to  the  holder  or  to  any 
sabsequent  indorser  who  may  be  compelled  to  pay  it.  But  the 
drawer  may  insert  in  the  instrument  an  express  stipulation 
negativing  or  limiting  his  own  liability  to  the  holder. 

§  69.  The  acceptor,  by  accepting  the  instrument,  engages 
that  he  will  pay  it  according  to  the  tenor  of  his  acceptance, 
and  admits: 

1.  The  existence  of  the  drawer,  the  genuineness  of  his  sig- 
Tiature,  and  his  capacity  and  authority  to  draw  the  instrument; 
and 

2.  The  existence  of  the  payee  and  his  then  capacity  to  indorse. 
§  70.    A  person   placing    his  signature  upon  an   instrument 

otherwise  than  as  maker,  drawer,  or  acceptor  is  deemed  to  be 
an  indorser,  unless  he  clearly  indicates  by  appropriate  words 
his  intention  to  be  bound  in  some  other  capacity. 

§  71.  Where  a  person  not  otherwise  a  party  to  an  instrument 
places  thereon  his  signature  in  blank,  before  delivery,  he  is  liable 
as  indorser,  in  accordance  wdth  the  following  rules:  — 

1.  If  the  instrument  is  payable  to  the  order  of  a  third  person, 
he  is  liable  to  the  payee  and  to  all  subsequent  parties. 

2.  If  the  instrument  is  payable  to  the  order  of  the  maker  or 
drawer,  or  is  payable  to  bearer,  he  is  liable  to  all  parties  subse- 
quent to  the  maker  or  drawer. 

3.  If  he  signs  for  the  accommodation  of  the  payee,  he  is  liable 
to  all  parties  subsequent  to  the  payee. 

§  72.  Every  person  negotiating  an  instrument  by  delivery  or 
by  a  qualified  indorsement,  warrants  : 

1.  That  the  instrument  is  genuine,  and  in  all  respects  what 
it  purports  to  be; 

2.  That  he  has  a  good  title  to  it; 

3.  That  all  prior  parties  had  capacity  to  contract ; 

4.  That  he  has  no  knowledge  of  any  fact  which  would  impair 
the  validity  of  the  instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only,  the  warranty 
extends  in  favor  of  no  holder  other  than  the  immediate  trans- 

^  Sic.     The  word  of  course  should  be  or. 


Art.  VII.]         NEGOTIABLE   INSTRUMENTS  LAW.  299 

feree.  The  provisions  of  subdivision  three  of  this  section  do 
not  apply  to  persons  negotiating  public  or  corporate  securities 
other  than  bills  and  notes.    '5  %  ^^7^ 

§  73.  Every  ^  indorser  who  indorses  without  qualification 
warrants  to  all  subsequent  holders   in  due  course : 

1.  The  matters  and  things  in  subdivisions  one,  two,  and  three 
of  the  next  preceding  section  ;  and 

2.  That  the  instrument  is  at  the  time  of  his  indorsement 
valid  and  subsisting. 

And  in  addition  he  engages  that  on  due  presentment  it  shall 
be  accepted  or  paid,  or  both,  as  the  case  may  be,  according  to 
its  tenor,  and  that  if  it  be  dishonored  and  the  necessary  pro- 
ceedings on  dishonor  be  duly  taken,  he  will  pay  the  amount 
thereof  to  the  holder  or  to  any  subsequent  indorser  who  may  be 
compelled  to  pay  it. 

§  74.  Where  a  person  places  his  indorsement  on  an  instru- 
ment negotiable  by  delivery  he  incurs  all  the  liabilities  of  an 
indorser. 

§  75.  As  respects  one  another  indorsers  are  liable  prima  facie 
in  the  order  in  which  they  indorse;  but  evidence  is  admissible 
to  show  that  as  between  or  among  themselves  they  have  agreed 
otherwise.  Joint  payees  or  joint  indorsees  who  indorse  are 
deemed  to  indorse  jointly  and  severally. 

§  76.  Where  a  broker  or  other  agent  negotiates  an  instrument 
without  indorsement,  he  incurs  all  the  liabilities  prescribed  by 
section  seventy-two  of  this  Act,^  unless  he  discloses  the  name  of 
his  principal  and  the  fact  that  he  is  acting  only  as  agent. ^'70-— ^IjT 

ARTICLE  VII. 

PRESENTMENT    FOR    PAYMENT. 

§  77.  Presentment  for  payment  is  not  necessary  in  order  to 
charge  the  person  primarily  liable  on  the  instrument;  but  if  the 

■    ^  This  seems  to  include  agents  indorsing  only  in  collection,  e.  g.  a  collect - 
in{?  bank,  overturning  the  distinction  in  United  States  v.  American  Bank,  70 
Fed.  Rep.  232.     See  National  Park  Bank  v.  Seaboard  Bank,  114  N.  Y.  28. 
»  See  Amendment,  1898,  ch.  336,  §  10. 


300  BILLS,  NOTES,  AND   CHEQUES.  [Art   VIL 

instrument  is,  by  its  terms,  payable  at  a  special  place,  and  he 
is  able  and  willing  to  pay  it  there  at  maturity,  and  bas  funds 
tbere  available  for  that  purpose,^  such  ability  and  willingness 
are  equivalent  to  a  tender  of  paj'ment  upon  his  part.  But  except 
as  herein  otherwise  provided,  presentment  for  payment  is  neces- 
sary in  order  to  charge  the  drawer  and  indorsers. 

§  78.  Where  the  instrument  is  not  payable  on  demand,  pre- 
sentment must  be  made  on  the  day  it  falls  due.  Where  it  is 
payable  on  demand,  presentment  must  be  made  within  a  reason- 
able time  after  its  issue,  except  that  in  the  case  of  a  bill  of  ex- 
change presentment  for  payment  will  be  sufficient  if  made  within 
a  reasonable  time  after  the  last  negotiation  thereof. 

§  79.  Presentment  for  payment,  to  be  sufficient,  must  be  made  : 

1.  By  the  holder,  or  by  some  person  authorized  to  receive 
payment  on  his  behalf; 

2.  At  a  reasonable  hour  on  a  business  day; 

3.  At  a  proper  place  as  herein  defined; 

4.  To  the  person  primarily  liable  on  the  instrument,  or  if  he 
ts  absent  or  inaccessible  to  any  person  found  at  the  place  where 
the  presentment  is  made. 

§  80.    Presentment  for  payment  is  made  at  the  proper  place : 

1.  Where  a  place  of  payment  is  specified  in  the  instrument, 
and  it  is  there  presented; 

2.  Where  no  place  of  payment  is  specified,  but  the  address 
of  the  person  to  make  payment  is  given  in  the  instrument,  and 
it  is  there  presented; 

3.  Where  no  place  of  payment  is  specified,  and  no  address  is 
given,  and  the  instrument  is  presented  at  the  usual  place  of 
business  or  residence  of  the  person  to  make  payment.* 

4.  In  any  other "  case  if  presented  to  the  person  to  make  pay- 
ment wherever  he  can  be  found,  or  if  presented  at  his  last  known 
place  of  business  or  residence. 

§  81.    The  instrument  must  be  exhibited  to  the  person  from 

^  The  words  'and  .  .  .  purpose  '  are  not  in  the  New  York  Statute  as  at 
first  passed,  but  are  inserted  by  Amendment,  1898,  chap.  336,  §  11.  The 
Colorado  Statute  does  not  contain  the  words. 

^  As  to  preference  of  the  place  of  business,  see  ante,  p.  110. 

*  Amendment,  1898,  chap.  336,  §  12.  \ 


Akt,  ML]         NEGOTIABLE   INSTRUMENTS  LAW.  301 

whom  payment  is  demanded,  and  when  it  is  paid  must  be  de- 
livered up  to  the  party  paying  it.^ 

§  82.  Where  the  instrument  is  payable  at  a  bank,  present- 
ment for  payment  must  be  made  during  banking  hours,  unless 
the  person  to  make  payment  has  no  funds  there  to  meet  it  at 
any  time  during  the  day,  in  which  case  presentment  at  any 
hour  before  the  bank  is  closed  on  that  day  is  sufficient. 

§  83.  Where  the  person  primarily  liable  on  the  instrument 
is  dead,  and  no  place  of  payment  is  specified,  presentment  for 
payment  must  be  made  to  his  personal  representative,  if  such 
there  be,  and  if  with  the  exercise  of  reasonable  diligence  he  can 
be  found. 

§  84.  Where  the  persons  primarily  liable  on  the  instrument 
are  liable  as  partners,  and  no  place  of  payment  is  specified,  pre- 
sentment for  payment  may  be  made  to  any  one  of  them  even 
thougli  there  has  been  a  dissolution  of  the  firm. 

§  85.  Where  there  are  several  persons  not  partners,  prima- 
rily liable  on  the  instrument,  and  no  place  of  paj-^ment  is  speci- 
fied, presentment  must  be  made  to  them  all. 

§  86.  Presentment  for  payment  is  not  required  in  order  to 
charge  the  drawer  where  he  has  no  right  to  expect  or  require 
that  the  drawee  or  acceptor  will  pay  the  instrument. 

§  87.  Presentment  for  payment  is  not  required  in  order  to 
charge  an  indorser  where  the  instrument  was  made  or  accepted 
for  his  accommodation,  and  he  has  no  reason  to  expect  that  the 
instrument  will  be  paid  if  presented. 

§  88.  Delay  in  making  presentment  for  payment  is  excused 
when  the  delay  is  caused  by  circumstances  beyond  the  control 
of  the  holder  and  not  imputable  to  his  default,  misconduct,  or 
negligence.  When  the  cause  of  delay  ceases  to  operate,  pre- 
sentment must  be  made  with  reasonable  diligence.  ^|  !>'•/' 

§  89.    Presentment  for  payment  may  be  dispensed  with: 

1.  Where  after  the  exercise  of  reasonable  diligence  present- 
ment as  required  b}'  this  Act  cannot  be  made  ; 

2.  Where  the  drawee  is  a  fictitious  person ; 

3.  By  waiver  of  presentment,  express  or  implied. 

^  But  suppose  he  does  not  require  it,  and  that  it  is  not  delirered  up  !  Sett 
aute,  p.  273. 


302  BILLS,  NOTES,  AND   CHEQUES.  [Art.  VH 

§  90.    The  instrument  is  dishonored  by  nou-paymeut  when  . 

1.  It  is  duly  presented  for  payment  and  payment  is  ret  used 
or  cannot  be  obtained;  or 

2.  Presentment  is  excused  and  the  instrument  is  overdue  and 
unpaid. 

§  91.  Subject  to  the  provisions  of  this  Act,  when  the  instru- 
ment is  dishonored  by  non-payment  au  immediate  right  of  re- 
course to  all  parties  secondarily  liable  thereon  accrues  to  the 
holder. 

§  92.  Every  negotiable  instrument  is  paj'able  at  the  time 
fixed  therein,  without  grace. ^  When  the  day  of  maturity 
falls  upon  Sundaj'  or  a  holiday,  the  instrument  is  payable  on 
the  next  succeeding  business  day.  Instruments  falling  due  or 
becoming  payable  •^  on  Saturday  ^  are  to  be  presented  for  pay- 
ment on  the  next  succeeding  business  day,  except  that  instru- 
ments payable  on  demand  may,  at  the  option  of  the  holder,  be 
presented  for  payment  *  before  twelve  o'clock  noon  on  Saturday 
when  that  entire  day  is  not  a  holiday. 

§  93.  Where  the  instrument  is  payable  at  a  fixed  period  after 
date,  after  sight,  or  after  the  happening  of  a  specified  event,  the 
time  of  payment  is  determined  by  excluding  the  day  from 
which  the  time  is  to  begin  to  run,  and  by  including  the  date  ^  of 
payment. 

§  94.  Where  the  instrument  is  made  payable  at  a  bank,  it 
is  equivalent  to  an  order  to  the  bank  to  pay  the  same  for  the 
account  of  the  principal  debtor  thereon,® 

§  95.  Payment  is  made  in  due  course  when  it  is  made  at  or 
after  the  maturity  of  the  instrument  to  the  holder  thereof,  in- 
good  faith  and  without  notice  that  his  title  is  defective. 

1  Grace  is  restored  in  Massachusetts  on  sight  '  drafts  and  bills  of  exchange.' 
1899,  chap.  130. 

2  The  words  '  or  becoming  payable '  inserted  1898,  chap.  336,  §  13. 
They  are  not  in  the  Colorado  Statute. 

3  For  the  word  '  Saturday '  the  Colorado  Statute  reads  '  any  day  in  any . 
place  where  any  part  of  such  day  is  a  holiday.' 

*  For  the  rest  of  the  sentence  the  Colorado  Statute  reads  '  during  reason- 
able hours  of  the  part  of  such  day  which  is  not  a  holiday.* 

*  Sic,  for  day. 

«  The  more  general  rule.  * 


Art.  VIII.J       NEGOTIABLE  INSTRUMENTS  LAW.  303 


ARTICLE  VIII. 

KOTICE    OF    DISHONOR. 

§  96.  Except  as  herein  otherwise  provided,  when  a  negotiable 
instrument  has  been  dishonored  by  non-acceptance  or  non-pay- 
ment notice  of  dishonor  must  be  given  to  the  drawer  and  to  each 
indorser,  and  any  drawer  or  indorser  to  whom  such  notice  is  not 
given  is  discharged. 

§  97.  The  notice  may  be  given  by  or  on  behalf  of  the  holder^ 
or  by  or  on  behalf  of  any  party  to  the  instrument  who  might  be 
compelled  to  pay  it  to  the  holder,  and  who,  upon  taking  it  up, 
would  have  a  right  to  reimbursement  from  the  party  to  whom 
the  notice  is  given. 

§  98.  Notice  of  dishonor  may  be  given  by  an  agent  either  in 
his  own  name  or  in  the  name  of  any  party  entitled  to  give  no'- 
tice,  whether  that  party  be  his  principal  or  not. 

§  99.  Where  notice  is  given  by  or  on  behalf  of  the  holder,  it 
inures  for  the  benefit  of  all  subsequent  holders  and  all  prior 
parties  who  have  a  right  of  recourse  against  the  party  to  whom 
it  is  given. 

§  100.  Where  notice  is  given  by  or  on  behalf  of  a  party  en- 
titled to  give  notice,  it  inures  for  the  benefit  of  the  holder 
and  all  parties  subsequent  to  the  party  to  whom  notice  is  given. 

§  101.  Where  the  instrument  has  been  dishonored  in  the 
hands  of  an  agent,  he  may  either  himself  give  notice  to  the  par- 
ties liable  thereon,  or  he  may  give  notice  to  his  principal..  If 
he  give  notice  to  his  principal,  he  must  do  so  within  the  same 
time  as  if  he  were  the  holder,  and  the  principal,  upon  the  re- 
ceipt of  such  notice,  has  himself  the  same  time  for  giving  no- 
tice as  if  the  agent  had  been  an  independent  holder. 

§  102.  A  written  notice  need  not  be  signed,  and  an  insuffi- 
cient written  notice  may  be  supplemented  and  validated  by  verbal 
communication.  A  misdescription  of  the  instrument  does  not 
vitiate  the  notice  unless  the  party  to  whom  the  notice  is  given 
is  in  fact  misled  thereby. 

§  103.  The  notice  may  be  in  writing  or  merely  oral,  and  may 
be  given  in  any  terms  which  sufficiently  identify  the  instrument 


304  BILLS,  NOTES,  AND   CHEQUES.  [Art.  VIIL 

and  indicate  that  it  has  been  dishonored  by  non-acceptance  or 
non-payment.  It  may  in  all  cases  be  given  by  delivering  it 
personally  or  through  the  mails. 

§  104.  Notice  of  dishonor  may  be  given  either  to  the  party 
himself  or  to  his  agent  on  that  behalf. 

§  105.  When  any  party  is  dead,  and  his  death  is  known  to 
the  party  giving  notice,  the  notice  must  be  given  to  a  personal 
representative,  if  there  be  one,  and  if  with  reasonable  diligence 
he  can  be  found.  If  there  be  no  personal  representative,  notice 
may  be  sent  to  the  last  residence  or  last  place  of  business  of  the 
deceased. 

§  106.  Where  the  parties  to  be  notified  are  partners,  notice 
to  any  one  partner  is  notice  to  the  firm  even  though  there  has 
been  a  dissolution. 

§  107.  Notice  to  joint  parties  who  are  not  partners  must 
be  given  to  each  of  them,  unless  one  of  them  has  authority  to 
receive  such  notice  for  the  others. 

§  108.  Where  a  party  has  been  adjudged  a  bankrupt  or  an 
insolvent,  or  has  made  an  assignment  for  the  benefit  of  creditors, 
notice  may  be  given  either  to  the  party  himself  or  to  his  trustee 
or  assignee. 

§  109.  Notice  may  be  given  as  soon  as  the  instrument  is  dis- 
honored ;  and  unless  delay  is  excused  as  hereinafter  provided, 
must  be  given  within  the  times  fixed  by  this  Act. 

§  110.  Where  the  person  giving  and  the  person  to  receive 
notice  reside  in  the  same  place,  ^  notice  must  be  given  within  the 
following  times: 

1.  If  given  at  the  place  of  business  of  the  person  to  receive 
notice,  it  must  be  given  before  the  close  of  business  hours  on  the 
day  following; 

2.  If  given  at  his  residence,  it  must  be  given  before  the 
usual  hours  of  rest  on  the  day  following; 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in 
time  to  reach  him  in  usual  course  on  the  day  following.^ 

§  111.      Where  the  person  giving  and  the  person  to  receive 

1  The  term  '  place '  clearly  needs  definition,  though  it  is  the  term  com- 
monly used  in  the  unwritten  law  merchant. 

2  Suppose  it  take  more  than  a  day  for  the  mail  ? 


Aki.  VHI.]        negotiable   INSTKUMENTS  LAW.  305 

notice  reside  in  different  places,  the  notice  must  be  given  within 
the  following  times:  — 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in 
time  to  go  by  mail  the  day  following  the  day  of  dishonor,  or  if 
there  be  no  mail  at  a  convenient  hour  on  that  day,  by  the  next 
mail  thereafter; 

2.  If  given  otherwise  than  through  the  post-office,  then  within 
the  time  that  notice  would  have  been  received  in  due  course  of 
mail  if  it  had  been  deposited  in  the  post-office  within  the  time 
specified  in  the  last  subdivision. 

§  112.  Where  notice  of  dishonor  is  duly  addressed  and  de- 
posited in  the  post-office,  the  sender  is  deemed  to  have  given 
due  notice,  notwithstanding  any  miscarriage  in  the  mails. 

§  113.  Notice  is  deemed  to  have  been  deposited  in  the  post- 
office  when  deposited  in  any  branch  post-uffice  or  in  any  letter- 
box under  the  control  of  the  post-office  department. 

§  114.  Where  a  party  receives  notice  of  dishonor,  he  has, 
after  the  receipt  of  such  notice,  the  same  time  for  giving  notice 
to  antecedent  parties  that  the  holder  has  after  the  dishonor. 

§  115.  Where  a  party  has  added  an  address  to  his  signa- 
ture, notice  of  dishonor  must  be  sent  to  that  address;  but  if 
he  has  not  given  such  address,  then  the  notice  must  be  sent  as 
follows :  — 

1.  Either  to  the  post-office  nearest  to  his  place  of  residence, 
or  to  the  post-office  where  he  is  accustomed  to  receive  his  let- 
ters ;  or 

2.  If  he  live  in  one  place,  and  have  his  place  of  business  in 
another,  notice  may  be  sent  to  either  place  ;  or 

3.  If  he  is  sojourning  in  another  place,  notice  may  be  sent  to 
the  place  where  he  is  sojourning.^ 

But  where  the  notice  is  actually  received  by  the  party  within 
the  time  specified  in  this  Act,  it  will  be  sufficient  though  not 
sent  in  accordance  with  the  requirements  of  this  section. 

§  116.  Notice  of  dishonor  may  be  waived  either  before  the 
time  of  giving  notice  has  arrived,  or  after  the  omission  to  give 
due  notice,  and  the  waiver  may  be  express  or  implied. 

§  117.     Where  the  waiver  is  embodied    in  the    instrument 

*  A  change  iu  the  law,  see  ante,  p.  162. 


306  BILLS,  NOTES,  AND   CHEQUES.  [Art.  VIIL 

itself,  it  is  binding  upon  all  parties  ;  but  where  it  is  written 
above  the  signature  of  an  indorser,   it  binds  him  only. 

§  118.  A  waiver  of  protest,  whether  in  the  case  of  a  foreigu 
bill  of  exchange  or  other  negotiable  instrument,  is  deemed  to 
be  a  waiver  not  only  of  a  formal  protest  but  also  of  presentment 
and  notice  of  dishonor. 

§  119.  Notice  of  dishonor  is  dispensed  with  when,  after  the 
exercise  of  reasonable  diligence,  it  cannot  be  given  to  ov  does 
not  reach  the  parties  sought  to  be  charged. 

§  120.  Delay  in  giving  notice  of  dishonor  is  excused  when 
the  delay  is  caused  by  circumstances  beyond  the  control  of  the 
holder  and  not  imputable  to  his  default,  misconduct,  or  negli- 
gence.^ When  the  cause  of  delay  ceases  to  operate,  notice  must 
be  given  with  reasonable  diligence. 

§  121.  Notice  of  dishonor  is  not  required  to  be  given  to  the 
drawer  in  either  of  the  following  cases : 

1.  Where  the  drawer  and  drawee  are  the  same  person; 

2.  Where  the  drawee  is  a  fictitious  person  or  a  person  not 
having  capacity  to  contract; 

3.  Where  the  drawer  is  the  person  to  whom  the  instrument  is 
presented  for  payment ; 

4.  Where  the  drawer  has  no  right  to  expect  or  require  that 
the  drawee  or  acceptor  will  honor  the  instrument ; 

5.  Where  the  drawer  has  countermanded  payment. 

§  122.  Notice  of  dishonor  is  not  required  to  be  given  to  an 
indorser  in  either  of  the  following  cases  : 

1.  Where  the  drawee  is  a  fictitious  person  or  a  person  not 
having  capacity  to  contract,  and  the  indorser  was  aware  of  the 
fact  at  the  time  he  indorsed  the  instrument; 

2.  Where  the  indorser  is  the  person  to  whom  the  instrument 
is  presented  for  payment  ; 

3.  Where  the  instrument  was  made  or  accepted  for  his 
accommodation. 

§  123.  Where  due  notice  of  dishonor  by  non-acceptance  has 
been  given,  notice  of  a  subsequent  dishonor  by  non-payment  is 
not  necessary  unless  in  the  meantime  the  instrument  has  beeu 
accepted. 

1  But  suppose  the  notice  is  given  by  one  not  '  the  holder.' 


AKT.  IX.]  NEGOTIABLE   INSTRUMENTS  LAW.  307 

§  124.  An  omission  to  give  notice  of  dishonor  by  non-accept- 
ance does  not  prejudice  the  rights  of  a  holder  in  due  course 
subsequent  to  the  omission. 

§  125.  Where  any  negotiable  instrument  has  been  dishonored, 
it  may  be  protested  for  non-acceptance  or  non-payment,  as  the 
case  may  be;  but  protest  is  not  required  except  in  the  case  of 
foreign  bills  of  exchange. 

ARTICLE   IX. 

DISCHARGE    OF    NEGOTIABLE    INSTRUMENTS. 

§  126.    A  negotiable  instrument  is  discharged : 

1.  By  payment  in  due  course  by  or  on  behalf  of  the  principal 
debtor ; 

2.  By  payment  in  due  course  by  the  party  accommodated, 
where  the  instrument  is  made  or  accepted  for  accommodation ; 

3.  By  the  intentional  cancellation  thereof  by  the  holder; 

4.  By  any  other  act  which  will  discharge  a  simple  contract 
for  the  payment  of  money; 

5.  When  the  principal  debtor  becomes  the  holder  of  the  in- 
strument at  or  after  maturity  in  his  own  right. 

§  127.  A  person  secondarily  liable  on  the  instrument  is 
discharged : 

1.  By  any  act  which  discharges  the  instrument; 

2.  By  the  intentional  cancellation  of  his  signature  by  the 
holder ; 

3.  By  the  discharge  of  a  prior  party ; 

4.  By  a  valid  tender  of  payment  made  by  a  prior  party; 

5.  By  a  release  of  the  principal  debtor,  unless  tlie  holder's 
right  of  recourse  against  the  party  secondarily  liable  is  expressly 
reserved; 

6.  By  any  agreement  binding  upon  the  holder  to  extend  the 
time  of  payment  or  to  postpone  the  holder's  right  to  enforce  thn 
instrument,  unless  ^  the  right  of  recourse  against  such  partv  is 
expressly  reserved. 

^  The  Colorado  Statute  here  inserts  'made  with  the  assent  of  the  party 
secondarily  liable,  or,'  §  120.  6. 


308  BILLS,  NOTES,   AND   CHEQUES.  [Art.  IX. 

§  128.  Where  the  instrument  is  paid  by  a  party  secondarily 
liable  thereon,  it  is  not  discharged;  but  the  party  so  paying  it 
is  remitted  to  his  former  rights  as  regards  all  prior  parties,  and 
he  may  strike  out  his  own  and  all  subsequent  indorsements,  and 
again  negotiate  the  instrument,  except : 

1.  Where  it  is  payable  to  the  order  of  a  third  person,  and  has 
been  paid  by  the  drawer;  and 

2.  Where  it  was  made  or  accepted  for  accommodation,  and 
has  been  paid  by  the  party  accommodated. 

§  129.  The  holder  may  expressly  renounce  his  rights  against 
any  party  to  the  instrument  before,  at,  or  after  its  maturity.  An 
absolute  and  unconditional  renunciation  of  his  rights  against 
the  principal  debtor  made  at  or  after  the  maturity  of  the  instru- 
ment discharges  the  instrument.  But  a  renunciation  does  not 
affect  the  rights  of  a  holder  in  due  course  without  notice.  A. 
renunciation  must  be  in  writing,  unless  the  instrument  is  de- 
livered up  to  the  person  primarily  liable  thereon. 

§  130.  A  cancellation  made  unintentionally,  or  under  a  mis- 
take, or  without  the  authority  of  the  holder,  is  inoperative;  but 
where  an  instrument  or  an}'  signature  thereon  appears  to  have 
been  cancelled  the  burden  of  [»roof  lies  on  the  party  who  alleges 
that  the  cancellation  was  made  unintentionally  or  under  a  mis- 
take or  without  authority. 

§  131.  Where  a  negotiable  instrument  is  materially  altered 
without  the  assent  of  all  parties  liable  thereon,  it  is  avoided 
except  as  against  a  party  who  has  himself  made,  authorized,  or 
assented  to  the  alteration  and  subsequent  indorsers.  But  when 
an  instrument  has  been  materially  altered  and  is  in  the  hands 
of  a  holder  in  due  course,  not  a  party  to  the  alteration,  he  may 
enforce  payment  thereof  according  to  its  original  tenor. 

§  132.    Any  alteration  which  changes : 

1.  The  date; 

2.  The  sum  payable,  either  for  principal  or  interest; 

3.  The  time  or  place  of  payment; 

4.  The  number  or  the  relations  of  the  parties ; 

5.  The  medium  or  currency  in  which  payment  is  to  be 
made; 

Or  which  adds  a  place  of  payment  where  no  place  of  payment 


Art   X]  negotiable    INSTRUMENTS   LAW.  309- 

is  specified,*  or  any  other  change  or  addition  which  alters  the 
effect  of  the  instrument  in  any  respect,  is  a  material  alteration. 

•ARTICLE   X. 

BILLS    OP    EXCHANGE  :     FORM    AND    INTERPRETATION. 

§  133.  A  bill  of  exchange  is  an  unconditional  order  in  writing 
addressed  by  one  person  to  another,"^  signed  by  the  person  giving 
it,  requiring  the  person  to  whom  it  is  addressed  to  pay  on  de- 
mand or  at  a  fixed  or*  determinable  future  time  a  sum  certain 
in  money  to  order  or  to  bearer. 

§  134.  A  bill  of  itself  does  not  operate  as  an  assignment  of 
the  funds  in  the  hands  of  the  drawee  available  for  the  payment 
thereof,  and  the  drawee  is  not  liable  on  the  bill  unless  and  until 
he  accepts  the  same. 

§  135.  A  bill  may  be  addressed  to  two  or  more  drawees 
jointly,  whether  they  are  partners  or  not;  but  not  to  two  or 
more  drawees  in  the  alternative  or  in  succession.  3  t^~(AZ} 

§  136.  An  inland  bill  of  exchange  is  a  bill  which  is,  or  on 
its  face  purports  to  be,  both  drawn  and  payable  within  this 
State.  Any  other  bill  is  a  foreign  bill.  Unless  the  contrary 
appears  on  the  face  of  the  bill,  the  holder  may  treat  it  as  an 
inland  bill. 

§  137.  Where  in  a  bill  the  *  drawer  and  drawee  are  the  same 
person,  or  where  the  drawee  is  a  fictitious  person  or  a  person  not 
having  capacity  to  contract,  the  holder  may  treat  the  instru- 
ment, at  his  option,  either  as  a  bill  of  exchange  or  a  promissory 
note. 

§  138.  The  drawer  of  a  bill  or  any  indorser  may  insert 
thereon  the  name  of  a  person  to  whom  the  holder  may  resort  in 
case  of  need,  that  is  to  say,  in  case  the  bill  is  dishonored  by 
non-acceptance  or  non-payment.  Such  a  person  is  called  the 
referee  in  case  of  need.  It  is  in  the  option  of  the  holder  to  re- 
sort to  the  referee  in  case  of  need  or  not,  as  he  may  see  fit. 

1  Nor  if  the  place  added  be  that  desiguated  by  law. 

*  Drawer  and  drawee  may  be  the  same  person.     See  §  137. 
»  Amendment,  1898,  eh.  336,  §  25. 

♦  The  word  'the'  inserted  1898,  chap.  336,  §  15. 


310  BILLS,  NOTES,  AND  CHEQUES.  [Aslt.  XI 

ARTICLE  XL 

ACCEPTANCE    OF    BILLS    OF    EXCHANGE. 

§  139.  The  acceptance  of  a  bill  is  the  signification  by  the 
drawee  of  his  assent  to  the  order  of  the  drawer.  The  acceptance 
must  be  in  writing  and  signed  by  the  drawee.^  It  must  not  ex- 
press that  the  drawee  will  perform  his  promise  by  any  other 
means  than  the  payment  of  money. 

§  140.  The  holder  of  a  bill  presenting  the  same  for  accept- 
ance may  require  that  the  acceptance  be  written  on  the  bill, 
and  if  such  request  is  refused  may  treat  the  bill  as  dishonored. 

§  141.  Where  an  acceptance  is  written  on  a  paper  other  than 
the  bill  itself,  it  does  not  bind  the  acceptor  except  in  favor  of  a 
person  to  whom  it  is  shown  and  who,  on  the  faith  thereof,  re- 
ceives the  bill  for  value.'^ 

§  142.  An  unconditional  promise  in  writing  to  accept  a  bill 
before  it  is  drawn  is  deemed  an  actual  acceptance  in  favor  of 
every  person  who,  upon  the  faith  thereof,  receives  the  bill  for 
value. 

§  143.  The  drawee  is  allowed  twenty-four  hours  after  pre- 
sentment in  which  to  decide  whether  or  not  he  will  accept 
the  bill;  but  the  acceptance  if  given  dates  as  of  the  day  of 
presentation. 

§  144.  Where  a  drawee  to  whom  a  bill  is  delivered  for  accept- 
ance destroys  the  same,  or  refuses  within  twenty-four  hours 
after  such  delivery,  or  within  such  other  period  as  the  holder 
may  allow,*  to  return  the  bill  accepted  or  non-accepted  to  the 
holder,  he  will  be  deemed  to  have  accepted  the  same. 

§  145.  A  bill  may  be  accepted  before  it  has  been  signed  by 
the  drawer,  or  while  otherwise  incomplete,  or  when  it  is  over- 
due, or  after  it  has  been  dishonored  by  a  previous  refusal  to 
accept  or  by  non-payment.     But  when  a  bill  payable  after  sight 

i  *  Drawer '  in  original  statute.     See  1898,  chap.  336,  §  27. 
2  But  suppose  the  separate  sheet  is  attached  to  the  bill  ? 
■  If  the  holder  allow  more  than  twenty-four  hours,  secondary  parties  will 
presumptively  be  discharged. 


Akt.  XI.]  NEGOTIABLE   INSTRUMENTS   LAW.  311 

is  dishonored  by  non-acceptance  and  the  drawee  subsequently 
accepts  it,  the  holder,  in  the  absence  of  any  different  agree- 
ment, is  entitled  to  have  the  bill  accepted  as  of  the  date  of  the 
hrot  presentment. 

§  146.  An  acceptance  is  either  general  or  qualified.  A  gen- 
eral acceptance  assents  without  qualification  to  the  order  of  the 
drawer.  A  qualified  acceptance  in  express  terms  varies  the 
effect  of  the  bill  as  drawn. 

§  147.  An  acceptance  to  pay  at  a  particular  place  is  a  general 
acceptance,  unless  it  expressly  states  that  the  bill  is  to  be  paid 
there  only  and  not  elsewhere. 

§  148,    An  acceptance  is  qualified  which  is: 

1.  Conditional,  that  is  to  say,  which  makes  payment  by  the 
acceptor  dependent  on  the  fulfilment  of  a  condition  therein 
stated; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of 
the  amount  for  which  the  bill  is  drawn; 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  par- 
ticular place; 

4.  Qualified  as  to  time  ; 

5.  The  acceptance  of  some  one  or  more  of  the  drawees,  but 
not  of  all. 

§  149.  The  holder  may  refuse  to  take  a  qualified  acceptance, 
and  if  he  does  not  obtain  an  unqualified  acceptance,  he  may 
treat  the  bill  as  dishonored  by  non-acceptance.  Where  a  quali- 
fied acceptance  is  taken,  the  drawer  and  indorsers  are  discharged 
from  liability  on  the  bill  unless  they  have  expressly  or  im- 
pliedly authorized  the  holder  to  take  a  qualified  acceptance,  or 
subsequently  assent  thereto.  When  the  drawer  or  an  indorser 
receives  notice  of  a  qualified  acceptance,  he  must  within  a  rea- 
sonable time  express  his  dissent  to  the  holder,  or  he  will  be 
deemed  to  have  assented  thereto. 


312  BILLS,  NOTES,  AND  CHEQUES.  [Art.  XIL 

ARTICLE  XII. 

PRESENTMENT    OF    BILLS    OF    EXCHANGE    FOB   ACCEPTANCE. 

§  150.    Presentment  for  acceptance  must  be  made  : 

1.  Where  the  bill  is  payable  after  sight,  or  in  any  other  case 
where  presentment  for  acceptance  is  necessary  in  order  to  fix 
the  maturity  of  the  instrument ; 

2.  Where  the  bill  expressly  stipulates  that  it  shall  be  pre- 
sented for  acceptance;  or 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the 
residence  or  place  of  business  of  the  drawee.  V*^  IV**  ~ lt»  5"~#4r" 

In  no  other  case  is  presentment  for  acceptance  necessary  in 
order  to  render  any  party  to  the  bill  liable. 

§  151.  Except  as  herein  otherwise  provided,  the  holder  of  a 
bill  which  is  required  by  the  next  preceding  section  to  be  pre- 
sented for  acceptance  must  either  present  it  for  acceptance  or 
negotiate  it  within  a  reasonable  time.  If  he  fails  to  do  so,  the 
drawer  and  all  indorsers  are  discharged. 

§  152.  Presentment  for  acceptance  must  be  made  by  or  on 
behalf  of  the  holder  at  a  reasonable  hour,  on  a  business  day,  and 
before  the  bill  is  overdue,  to  the  drawee  ^  or  some  person  author- 
ized to  accept  or  refuse  acceptance  on  his  behalf;  and  • 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees  who  are 
not  partners,  presentment  must  be  made  to  them  all,  unless  one 
has  authority  to  accept  or  refuse  acceptance  for  all,  in  which 
case  presentment  may  be  made  to  liim  only; 

2.  Where  the  drawee  is  dead,  presentment  may  be  made  to 
his  personal  representative.'^  IfcAi  l"^^    LfJ 

3.  Where  the  drawee  has  "teen  adjudged  a  bankrupt  or  an 
insolvent,  or  has  made  an  assignment  for  the  benefit  of  cred- 
itors, presentment  may  be  made  to  him  or  to  his  trustee  or 
assignee. 

§  153.    A  bill  may  be  presented  for  acceptance  on  any  day  on 

1  '  Drawer  '  in  original  statute.     See  1898,  chap.  336,  §  30. 

2  The  presentment  in  question  being  for  acceptance,  why  make  it  to  the 
personal  representative  ?  He  has  no  authority  to  accept,  and  his  signature, 
being  that  of  a  stranger,  not  the  drawee,  would  not  be  acceptance.  See 
ante,  p.  51. 


Art.  XII]  NEGOTIABLE  INSTRUMENTS  LAW.  313 

which  negotiable  instruments  may  be  presented  for  payment 
under  the  provisions  of  sections  seventy-nine  and  ninety-two 
of  this  Act.^  When  Saturday  is  not  otherwise  a  holiday,  pre- 
sentment for  acceptance  may  be  made  before  twelve  o'clock  noon 
on  that  day.'^ 

§  154.  Where  the  holder  of  a  bill  drawn  payable  elsewhere 
than  at  the  place  of  business  or  the  residence  of  the  drawee  hais 
not  time  with  the  exercise  of  reasonable  diligence  to  present  the 
bill  for  acceptance  before  presenting  it  for  payment  on  the  day 
that  it  falls  due,  the  delay  caused  by  presenting  the  bill  for 
acceptance  before  presenting  it  for  payment  is  excused  and  does 
not  discharge  the  drawers  and  indorsers.bw  S'lote'S'^^ 

§  155.  Presentment  for  acceptance  is  excused  and  a  bill  may 
be  treated  as  dishonored  by  non-acceptance  in  either  of  the 
following  cases:  — 

1.  Where  the  drawee  is  dead,  or  has  absconded,  or  is  a  ficti- 
tious person  or  a  person  not  having  capacity  to  contract  by  bill; 

2.  Where,  after  the  exercise  of  reasonable  diligence,  present- 
ment cannot  be  made; 

3.  Where  although  presentment  has  been  irregular,  accept- 
ance has  been  refused  on  some  other  ground. 

§  156.    A  bill  is  dishonored  by  non-acceptance : 

1.  When  it  is  duly  presented  for  acceptance,  and  such  an 
acceptance  as  is  prescribed  by  this  Act  is  refused  or  cannot  be 
obtained;  or 

2.  When  presentment  for  acceptance  is  excused  and  the  bill 
is  not  accepted.^  ^  C 

§  157.  Where  a  bill  is  duly  presented  for  acceptance  and  is 
not  accepted  within  the  prescribed  time,  the  person  presenting 
it  must  treat  the  bill  as  dishonored  by  non-acceptance  or  he 
loses  the  right  of  recourse  against  the  drawer  and  indorsers. 

§  158.  When  a  bill  is  dishonored  by  non-acceptance,  an  imme- 
diate right  of  recourse  against  the  drawer  and  indorsers  accrues 
to  the  holder,  and  no  presentment  for  payment  is  necessary.^  I  b  3 

1  Amendment,  1898,  ch.  336,  §  17. 

'^  For  the  last  sentence  the  Colorado  Statute  reads,  '  When  any  day  is  in 
part  a  holiday,  presentment  for  acceptance  may  be  made  during  reasonable 
hours  of  the  part  of  such  day  which  is  not  a  holiday.'     §  146. 


314  BILLS,  NOTES,  AND  CHEQUES.  [Aax,  XIIL 

AETICLE  XIIL 

PROTEST    OF    BILLS    OF   EXCHANGE. 

§  159.  Where  a  foreign  bill  appearing  on  its  face  to  be  such 
is  dishonored  by  non-acceptance,  it  must  be  duly  protested  for 
non-acceptance,  and  where  such  a  bill  has  not  previously  been 
dishonored  by  non-acceptance  is  dishonored  by  non-payment,  it 
must  be  duly  protested  for  non-payment.  If  it  is  not  so  pro- 
tested, the  drawer  and  indorsers  are  discharged.  Where  a  bill 
does  not  appear  on  its  face  to  be  a  foreign  bill,  protest  thereof 
in  case  of  dishonor  is  unnecessary,  fo  /  '^{p    \i  I  2-1^ 

§  160.  The  protest  must  be  annexed  to  the  oill,  or  must  con- 
tain a  copy  thereof,  and  must  be  under  the  hand  and  seal  of  the 
notary  making  it,  and  must  specify: 

1.  The  time  and  place  of  presentment; 

2.  The  fact  that  presentment  was  made  and  the  manner 
thereof ; 

3.  The  cause  for  protesting  the  bill ; 

4.  The  demand  made  and  the  answer  given,  if  any,  or  the 
fact  that  the  drawee  or  acceptor  could  not  be  found.  ^ I  ^* 

§  161.    Protest  may  be  made  by : 

1.  A  notary  public ;  or 

2.  By  any  respectable  resident  of  the  place  where  the  bill  is 
dishonored,  in  the  presence  of  two  or  more  credible  witnesses.* 

§  162.  When  a  bill  is  protested,  such  protest  must  be  made 
on  the  day  of  its  dishonor,  unless  delay  is  excused  as  herein 
provided.  When  a  bill  has  been  duly  noted,  the  protest  may  be 
subsequently  extended  as  of  the  date  of  the  noting. 

§  163.  A  bill  must  be  protested  at  the  place  where  it  is  dis- 
honored, except  that  when  a  bill  drawn  payable  at  the  place  of 
business  or  residence  of  some  person  other  than  the  drawee  has 
been  dishonored  by  non-acceptance,  it  must  be  protested  for  non- 
payment at  the  place  where  it  is  expressed  to  be  payable,  and  no  ^ 
further  presentment  for  payment  to,  or  demand  on,  the  drawee  is  ' 
necessary,  w  /  tfof^^     t  ^  T 

1  Observe  that  the  statute  makes  no  distinction,  except  in  order  of  terms, 
between  a  notary  and  '  any  respectable  resident.' 


Art.  XIV.]        NEGOTIABLE   INSTRUMENTS  LAW.  315 

§  164.  A  bill  which  has  been  protested  for  noa-acceptance 
may  be  subsequently  protested  for  non-payment.^  I  S~^ 

§  165.  Where  the  acceptor  has  been  adjudged  a  bankrupt  or 
an  insolvent,  or  has  made  an  assignment  for  the  benefit  of  cred- 
itors, before  the  bill  matures,  the  holder  may  cause  the  bill  to 
be  protested  for  better  security  ^  against  the  drawer  or  indorsers. 

§  166.  Protest  is  dispensed  with  by  any  circumstances  which 
would  dispense  with  notice  of  dishonor.  Delay  in  noting  or 
protesting  is  excused  when  delay  is  caused  by  circumstances 
beyond  the  control  of  the  holder  and  not  imputable  to  his  de- 
fault, misconduct,  or  negligence  When  the  cause  of  delay 
ceases  to  operate,  the  bill  must  be  noted  or  protested  with 
reasonable  diligence. 

§  167.  Where  a  bill  is  lost  or  destroyed,  or  is  wrongly  de- 
tained from  the  person  entitled  to  hold  it,  protest  may  be  made 
on  a  copy  or  written  particulars  thereof. 


ARTICLE  XIV. 

ACCEPTANCE   OF   BILLS    OF   EXCHANGE    FOR   HONOR.' 

§  168.  Where  a  bill  of  exchange  has  been  protested  for  dis- 
honor by  non-acceptance  or  protested  for  better  security  and  is 
not  overdue,  any  person  not  being  a  party  already  liable  thereon 
may,  with  the  consent  of  the  holder,  intervene  and  accept  the 
bill  supra  protest  for  the  honor  of  any  party  liable  thereon  or 
for  the  honor  of  the  person  for  ^  whose  account  the  bill  is  drawn.* 
The  acceptance  for  honor  may  be  for  part  only  of  the  sum  for 
■which  the  bill  is  drawn ;  and  where  there  has  been  an  accept- 
ance for  honor  for  one  party,  there  may  be  a  further  acceptance 
by  a  different  person  for  the  honor  of  another  party. 

§  169.  An  acceptance  for  honor  supra  protest  must  be  in 
■writing  and  indicate  that  it  is  an  acceptance  for  honor,  and 
must  be  signed  by  the  acceptor  for  honor. 

1  Qu.  of  the  existence  of  any  such  custom  in  this  country  ? 

'-'  On  this  subject  see  the  remarks  ante,  p.  7. 

»  Amendment,  1898,  ch.  336,  §  28. 

*  May  the  drawee  accept  for  honor  ?    See  ante,  p.  62. 


310  BILLS,  NOTES,  AND   CHEQUES.  [Art   XIV. 

§  170.  Where  an  acceptance  for  honor  does  not  expressly  state 
for  whose  honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for 
the  lienor  of  the  drawer. 

§  171.  The  acceptor  for  honor  is  liable  to  the  holder  and  to 
all  parties  to  the  bill  subsequent  to  the  party  for  whose  honor  he 
has  accepted. 

§  172.  The  acceptor  for  honor  by  such  acceptance  engages 
that  he  will  on  due  presentment  pay  the  bill  according  to  the 
terms  of  his  acceptance,  provided  it  shall  not  have  been  paid  by 
the  drawee,  and  provided  also  that  it  shall  have  been  duly  pre- 
sented for  payment  and  protested  for  non-payment  and  notice  of 
dishonor  given  to  him. 

§  173.  Where  a  bill  payable  after  sight  is  accepted  for  honor, 
its  maturity  is  calculated  from  the  date  of  the  noting  for  non- 
acceptance  and  not  from  the  date  of  the  acceptance  for  honor. 

§  174.  Where  a  dishonored  bill  has  been  accepted  for  honor 
supra  protest  or  contains  a  reference  in  case  of  need,  it  must  be 
protested  for  non-payment  before  it  is  presented  for  payment  to 
the  acceptor  for  honor  or  referee  in  case  of  need. 

§  175.  Presentment  for  payment  to  the  acceptor  for  honor 
must  be  made  as  follows :  — 

1,  If  it  is  to  be  presented  in  the  place  where  the  protest  for 
non-payment  was  made,  it  must  be  presented  not  later  than  the 
day  following  its  maturity; 

2.  If  it  is  to  be  presented  in  some  other  place  than  the  place 
where  it  was  protested,  then  it  must  be  forwarded  within  the 
time  specified  in  section  One  Hundred  and  Eleven.^ 

§  176.  The  provisions  of  section  Eighty-eight  apply  where 
there  is  delay  in  making  presentment  to  the  acceptor  for  honor 
or  referee  in  case  of  need.^ 

§  177.  When  the  bill  is  dishonored  by  the  acceptor  for  honor, 
it  must  be  protested  for  non-payment  by  him. 

1  Amendment,  1898,  ch.  336,  §  18. 
«  Id.  §  19. 


Akt  XVI.]         NEGOTIABLE   INSTRUMENTS   LAW.  317 

ARTICLE   XV. 

PAYMENT  OF  BILLS  OF  EXCHANGE  FOR  HONOR.^ 

§  178.  Where  a  bill  has  been  protested  for  non-payment,  any 
person  may  intervene  and  pay  it  supra  protest  for  the  honor 
of  any  person  liable  thereon  or  for  the  honor  of  the  person  for 
whose  account  it  was  drawn. 

§  179.  The  payment  for  honor  supra  protest,  in  order  to  ope- 
rate as  such  and  not  as  a  mere  voluntary  payment,  must  be 
attested  by  a  notarial  act  of  honor,  which  may  be  appended  to 
the  protest  or  form  an  extension  of  it. 

§  180.  The  notarial  act  of  honor  must  be  founded  on  a  dec- 
laration made  by  the  payer  for  honor  or  by  his  agent  in  that 
behalf,  declaring  his  intention  to  pay  the  bill  for  honor  and  for 
whose  honor  he  pays. 

§  181.  Where  two  or  more  persons  offer  to  pay  a  bill  for  tho 
honor  of  different  parties,  the  person  whose  payment  will  dis- 
charge most  parties  to  the  bill  is  to  be  given  the  preference. 

§  182.  Where  a  bill  has  been  paid  for  honor,  all  parties  sub- 
sequent to  the  party  for  whose  honor  it  is  paid  are  discharged, 
but  the  payer  for  honor  is  subrogated  for  and  succeeds  to  both 
the  rights  and  duties  of  the  holder  as  regards  the  part}'  for  whose 
honor  he  pays  and  all  parties  liable  to  the  latter. 

§  183.  Where  the  holder  of  a  bill  refuses  to  receive  payment 
supra  protest,  he  loses  his  right  of  recourse  against  any  party 
who  would  have  been  discharged  by  such  payment. 

§  184.  The  payer  for  honor,  on  paying  to  the  holder  tho 
amount  of  the  bill  and  the  notarial  expenses  incidental  to  its 
dishonor,  is  entitled  to  receive  both  the  bill  itself  and  the 
protest. 

ARTICLE    XVI. 

BILLS    IN    A    SET. 

^  185.  Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set 
being  numbered  and  containing  a  reference  to  the  other  partSj 
the  whole  of  the  parts  constitutes  one  bill. 

1  See  the  remarks  ante,  p.  7 


318  BILLS,  NOTES,   AND   CHEQUES.  [Abt.  XVIL 

§  186.  Where  two  or  more  parts  of  a  set  are  negotiated  to 
different  holders  in  due  course,  the  holder  whose  title  first 
accrues  is,  as  between  such  holders,  the  true  owner  of  the  bill. 
But  nothing  in  this  section  affects  the  rights  of  a  person  who  iu 
due  course  accepts  or  pays  the  part  first  presented  to  him. 

§  187.  Where  the  holder  of  a  set  indorses  two  or  more  parts 
to  different  persons,  he  is  liable  on  every  such  part,  and  every 
indorser  subsequent  to  him  is  liable  on  the  part  he  has  himself 
indorsed  as  if  such  parts  were  separate  bills. 

§  188.  The  acceptance  may  be  written  on  any  part,  and  it 
must  be  written  on  one  part  only.  If  the  drawee  accepts  more 
than  one  part,  and  such  accepted  parts  are  negotiated  to  different 
holders  in  due  course,  he  is  liable  on  every  such  part  as  if  it  were 
a  separate  bill. 

§  189.  When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it 
without  requiring  the  part  bearing  his  acceptance  to  be  delivered 
up  to  him,  and  that  part  at  maturity  is  outstanding  in  the  hands 
of  a  holder  in  due  course,  he  is  liable  to  the  holder  thereon. 

§  190.  Except  as  herein  otherwise  provided,  where  any  one 
part  of  a  bill  drawn  in  a  set  is  discharged  by  payment  or  other- 
wise  the  whole  bill  is  discharged. 

ARTICLE   XVII. 

PEOMISSORY    NOTES    AND    CHEQUES. 

§  191.  A  negotiable  promissory  note  within  the  meaning  of 
this  Act  is  an  unconditional  promise  in  writing  made  by  one 
person  to  another,^  signed  by  the  maker,  engaging  to  pay  on 
demand  or  at  a  fixed  or  determinable  future  time,  a  sum  certain 
in  money,  to  order  or  to  bearer.  Where  a  note  is  drawn  to  the 
maker's  own  order,  it  is  not  complete  until  indorsed  by  him. 

§  192.     A  cheque  is  a  bill  of  exchange  drawn  on  a  bank,  pay 
able  on  demand.     Except  as  herein  otherwise  provided,  the  pro- 
visions of  this  Act  applicable  to  a  bill  of  exchange  payable  on 
demand  apply  to  a  cheque. 

^  The  maker  may  make  the  note  payable  to  his  own  order,  as  the  next  sea- 
tence  but  one  shows. 


Art.  XVII.]       NEGOTIABLE   INSTRUMENTS   LAW.  319 

§  193.  A  cheque  must  be  presented  for  payment  within  a 
reasonable  time  after  its  issue,  or  the  drawer  will  be  discharged 
from  liability  thereon  to  the  extent  of  the  loss  caused  by  the 
delay. 

§  194.  Where  a  cheque  is  certified  by  the  bank  on  which  it 
is  drawn,  the  certification^  is  equivalent  to  an  acceptance.^ 

§  195.  Where  the  holder  of  a  cheque  procures  it  to  be  ac- 
cepted or  certified,  the  drawer  and  all  indorsers  are  discharged 
from  liability  thereon. 

§  196.  A  cheque  of  itself  does  not  operate  as  an  assignment 
of  any  part  of  the  funds  to  the  credit  of  the  drawer  with  the 
bank,  and  the  bank  is  not  liable  to  the  holder  unless  and  until 
it  accepts  or  certifies  the  cheque. 

[In  the  New  York  Statute,  an  article  follows  concerning 
Notes  given  for  Patent  Rights  and  for  a  Speculative  Con- 
sideration.] 

1  '  Certificate  '  in  original  statute.     Amendment,  1898,  chap.  336,  §  29. 
*  What  does  '  acceptance '  as  to  a  cheque  signify  ?      It  certainly  is  not 
the  same  thing  as  acceptance  of  a  bill  of  exchange.     It  is  a  misleading  term- 


INDEX. 


21 


INDEX. 


A. 

ABSCONDING, 

as  excuse  of  presentment,  174. 
ABSOLUTE   DEFENCES, 

dietinguished  from  equities,  200,  201. 

use  of  the  term,  201. 

delivery  and  estoppel,  202-205. 

how  estoppel  to  deny  delivery  arises,  202-205. 
holding  in  due  course  necessary,  203. 
making  theft  easy,  203-205. 
*  one  of  two  innocent  persons  '  rule,  204,  206,  206. 
fraud  in  esse  contractus,  205,  20G. 

distinguished  from  ordinary  fraud,  205. 
material  alteration,  206-221. 

destroys  the  contract,  206,  207. 
what  alterations  are  material,  207. 
changing  legal  effect,  207-210. 
immaterial  alteration,  207. 
made  with  intent,  210-214. 
correcting  mistake,  210-214. 
rule  in  regard  to  mistaken  alteration,  213. 
without  consent,  214-216. 

who  are  deemed  to  consent,  214. 
acceptance  of  altered  bill,  216. 
alteration  by  drawer,  215,  216. 
alteration  by  stranger,  216. 
filling  blanks  wrongfully,  216,  217. 
criminal  act  of  agent,  217,  220. 
facilitating  alteration,  217-221. 

negligence  in  such  matter,  218-220. 
Young  V.  Grote  misunderstood,  219,  220. 
alteration  of  marginal  term,  221. 
cutting  instrument  apart,  221. 
forged  indorsement,  222,  223. 
chain  of  title,  222. 
nominal  exceptions,  222,  223. 
forged  signature  of  drawer,  223-226. 
peculiarity  of  the  case,  223-225. 


324  INDEX. 

I 

ABSOLUTE   DEFENCES,  — continued. 
forged  signature  of  drawer,  — continued. 
estoppel  to  deny  signature,  223-226. 
rule  as  to,  founded  on  custom,  225. 
and  may  be  changed  by  custom,  225. 
does  not  extend  beyond  drawer's  signature,  225,  226. 
other  cases  of  estoppel,  226. 
incapacity,  226-229. 

a  defence  in  all  cases  to  incompetent  party,  226,  227. 
capacity  to  transfer  distinguished,  227. 
corporations,  228,  229. 
married  women  at  common  law,  229,  n. 
illegality,  229-231. 

statute  and  common  law  distinguished,  229,  230. 
saving  of  holders  in  due  course,  230,  23L 
statutes  of  limitation,  231. 

absolutp:  notice, 

of  equities,  233,  234,  240. 
ACCELERATING  PAYMENT,  30,  36,  38. 
ACCEPTANCE, 
proper,  50-56. 

drawee  before,  50. 

what  it  is,  50. 

cheque  '  accepted,'  50,  51. 

how  acceptor  contracts,  50,  51. 

of  bills  in  a  set,  50,  n. 

only  drawee  may  accept,  51. 

nature  of  contract,  51. 

bill  taken  before,  51,  52. 
consideration  as  to,  51. 
no  drawee  named,  51,  n. 
incidents  of  contract,  52. 

what  acceptance  achnits,  52. 
acceptance  irrevocable,  52. 
may  be  required  in  writing,  53. 
oral  acceptance,  53,  58,  59. 
before  completion  of  bill,  53. 
time  given  for,  54. 
by  agent,  54. 
how  signified,  54,  55. 
'  accepted,'  55. 
signature  of  drawee,  55. 
'  presented,'  '  seen,'  date,  55. 
kinds  of  acceptance  proper,  55,  56l 
general,  65,  56. 
qualified,  56. 
quasi-acceptance,  57-66. 
on  separate  sheet,  67. 
by  telegraph,  57. 


INDEX.  325 


ACCEPTANCE,  —  roH/muficf. 
quasi-acceptance,  —  continued. 

oral  acceptance  and  Statute  of  Frauds,  68,  59. 
acceptance  by  conduct,  60,  61. 
by  giving  credit,  60. 
destruction  of  bill,  60,  61. 
nature  and  incidents  of  contract,  61. 
acceptance  for  honor,  61-63. 
not  of  custom  here,  61. 
for  better  security,  61,  62. 
must  be  in  writing,  61. 
for  whom  and  by  whom,  61,  62. 
'  in  case  of  need,'  62. 
nature  and  incidents  of  contract,  62,  63. 
promise  to  accept  or  '  virtual '  acceptance,  63-66. 
what  meant  by,  63,  64. 
when  made,  64. 
terms  of,  64. 
should  identify  bill,  64. 
nature  of  the  contract,  64-66. 

how  it  differs  from  acceptance,  65. 
in  whose  favor  binding,  65,  66. 
existing  bill,  65,  n. 
non-existing  bill,  65,  n. 
incidents  of  the  contract,  66. 
by  telegram,  66,  n. 
presentment  for  acceptance,  79-82,  113. 

drawer  contracts  for  acceptance,  79,  80. 
refusal  of  acceptance,  80,  81. 
rule  in  Pennsylvania,  81. 
the  Statute,  81,  82. 

where  to  be  made,  81. 
failure  to  present,  82. 
at  what  time  to  be  made,  82. 
what  is  dishonor,  82. 
what  to  be  done  if  refused,  82. 
acceptance  an  admission  of  drawer's  signature,  223-225. 
reason  thereof,  224. 
bill  taken  before  acceptance,  224,  225. 
admission  limited  to  drawer's  signature,  225,  226. 
ACCIDENT, 

as  an  excuse  of  presentment,  166,  172,  175. 
alteration  of  paper  by,  210-214. 
ACCOMMODATION   CONTRACT, 
what  is,  184. 
consideration,  184-186. 
belongs  to  law  merchant,  184. 
peculiarity  of,  185. 
accommodation  party  a  surety  sub  modo,  185,  186. 


326  INDEX. 

ACCOM  MOD  ATION   CONTRACT,  —  continued. 

taking  accommodation  paper  with  notice,  186,  187. 

taking  accommodation  paper  for  pre-existing  debt,  248. 

fraudulent  diversion,  254,  255. 
ACTION, 

when  it  may  be  brought,  18,  19. 
ADDED   LANGUAGE, 

after  note,  33. 
ADMIRALTY, 

early  jurisdiction  over  instruments  like  bills  and  notes,  2,  3. 
ADMISSION, 

of  genuineness,  98-101,  223-226. 

of  capacity,  etc.,  98-101. 
AGENCY, 

signing  as  '  agent,'  43-46. 

mere  description  of  signer,  44,  45. 

exempting  one's  self  from  liability,  45,  46. 

presentment  to  agent,  127. 

notice  of  dishonor  by  agent,  142. 

notice  of  dishonor  to  agent,  145. 

agent  treated  as  owner  as  to  time  of  notice  of  dishonor,  150. 

agent's  warranty,  183. 

creditor  taking  paper  as  agent,  247. 
ALTERATION. 

definition  of  term,  207. 

changing  legal  effect,  207-209. 

by  accident  or  mistake,  210-214. 

without  consent,  214-217. 

by  stranger,  216. 

by  custodian  or  agent,  "217. 

facilitated  by  last  holder,  217-221. 

doctrine  of  estoppel  in  such  cases,  219. 

negligence,  219,  220. 

removing  marginal  terms,  221. 

cutting  instrument  in  two,  221. 

forgery  of  indorsement,  222,  223. 

{See  FoRGEKT.) 
AMOMALOUS   SIGNATURE, 

a  kind  of  indorsement,  46. 

different  doctrines  as  to,  47-49. 

by  the  Statute,  49. 
ASSURER'S   CONTRACT, 

annexed  to  contract  of  law  merchant,  188. 

guaranty  and  suretyship  explained,  188,  189, 

guaranty  in  specific  sense,  189-195. 
contemporaneous,  190. 
I  consideration,  190. 

subsequent,  191. 

Statute  of  Frauds,  191,  192. 


INDEX.  327 


ASSURER'S   CO'STR ACT,  — continued. 
guaranty  in  specific  sense,  —  continued. 
negotiability,  192-194. 
as  to  grace,  195. 

as  to  presentment  and  notice,  195. 
suretyship  in  specific  sense,  195, 196. 
mortgage,  196. 
ATTORNEY  FEES,  30. 

B. 

BANK, 

power  of  officers  of,  to  certify  cheques,  69. 

paper  payable  at,  106-109. 

presence  of  paper  in,  107. 

branches  of,  109. 
BANKRUPT, 

agreement  with,  for  time,  265. 
BANKRUPTCY, 

as  excuse  of  presentment,  126,  175. 
BEARER, 

when  payable  to,  25,  26. 
BILL  OF  EXCHANGE, 

defined, 11. 
BLANK  SPACES, 

leaving,  in  completed  paper,  216,  217,  263^ 

in  uncompleted  paper,  255,  256. 
BROKER, 

warranty  in  transfer  by,  183. 

c. 

CANADA  MONEY,' 
paper  payable  in,  28. 
CAPACITY, 

of  parties  in  general,  226-229. 

to  transfer  distinguished,  227. 

admission  or  warranty  of,  98-102. 

of  indorser  to  impeach  instrument,  101,  102. 

of  corporations,  228,  229. 
CASHIER   OF   BANK, 

instruments  payable  to  order  of,  25. 

power  of,  to  certify  cheques,  69. 
CERTAINTY  OF   PARTIES,  23-26. 
CERTAINTY  OF  SUM. 

meaning  of,  29-31. 

alternate  sums^  29. 

attorney  fees,  30. 

payment  '  on  or  before  '  a  certain  time,  30,  36t 

payment  with  current  exchange,  30. 

accelerating  time  of  payment,  81. 


328  INDEX. 

CERTAINTY  OF  TIME, 

condition  or  contingency,  32,  38. 

payment  out  of  particular  fund,  32. 

additional  language,  33,  34. 

definiteness  of  time,  36. 

payment  '  on  or  before '  a  certain  time,  36. 

no  time  stated,  37. 

'  when  convenient,'  37. 

reasonable  time,  37. 

•  at  such  times  as  '  the  holder  may  require,  38. 

time  in  alternative,  38. 
CERTIFICATE   OF   DEPOSIT, 

negotiable  by  custom,  10,  n. 
CERTIFICATION  OF   CHEQUE, 

negotiable,  10,  n. 

how  signified,  67. 

a  voluntary  act,  67. 

unlike  acceptance  of  bill,  67. 

who  may  certify,  68. 

nature  of  the  contract,  68. 

incidents  of  the  contract,  69. 
mistake,  69. 

discharges  drawer  and  others,  when,  69. 
CHANCERY, 

as  to  jurisdiction  over  law  merchant,  3. 
CHEQUE, 

defined,  11. 

certification  of,  67-69.     (See  Certification  of  Cheque.) 

liability  of  drawer  of,  75-79. 

not  properly  a  bill  of  exchange,  75.    {See  Drawer's  Contract.) 
CIPHER, 

signature  in,  38. 
COLLATERAL  SECURITY, 

reference  to,  in  note,  34. 

paper  taken  as,  242-250. 
COMMON  LAW, 

its  relation  to  law  merchant,  1-10. 

how  judges  of,  have  considered  law  merchant,  4-6. 

does  not  govern  law  merchant,  7. 
COMPETENCY, 

of  indorser  to  impeach  paper,  for  another,  101,  102. 

warranty  of,  98,  102. 

of  parties  in  general,  226-229. 

of  corporations,  228,  229. 
COMPOSITION  AND  RELEASE, 

effect  on  surety,  260-263. 

reservation  of  rights,  261-263. 
CONDITION, 

fatal  to  bill,  note,  or  cheque,  32,  33- 


INDEX.  329 

CONDITIONAL  ACCEPTANCE,  56. 
CONDITIONAL   DELIVERY, 

may  be  sliown  between  the  parties,  15,  16. 

wrong  views  of,  16. 
CONDITIONAL   PAYMENT, 

paper  taken  in,  242-250. 
CONFLICT  OF   LAWS, 

general  doctrine  of,  278,  279. 

as  to  liability  of  maker  or  acceptor,  279-282. 

in  regard  to  amount  recoverable  against  maker  or  acceptor,  281. 

as  to  liability  of  drawer  or  indorser,  282-284. 

in  regard  to  presentment  and  demand,  282. 
protest  and  notice,  282,  283. 
amount  recoverable,  283. 

procedure  and  remedy,  284. 
CONSENT, 

to  alteration,  214-217. 
CONSIDERATION, 

imposed  upon  the  custom  of  merchants,  3,  8. 

by  a  fiction,  3,  8. 

fiction  dropped,  8. 

distinction  between  common  law  and  law  merchant,  8,  9. 

valuable,  241-248. 
CONSTRUCTIVE  NOTICE, 

of  equities,  234-239. 
CONTINGENCY, 

payment  on,  32,  33. 

happening  of  event,  32. 
CONTRACT, 

consideration,  241-248. 

fraud  in  esse  contractus,  205,  206. 
•    alteration,  207-221.     (See  Alteration.) 

competency  of  parties,  226-229.     {See  Absolute  Defencrs.) 
CORPORATIONS, 

capacity  of,  228,  229. 
COUPONS, 

of  corporations  negotiable,  10,  n. 
•CURRENCY,' 

paper  payable  in,  27. 
'CURRENT  EXCHANGE,' 

paper  payable  with,  30. 
'CURRENT   FUNDS,' 

paper  payable  in,  27,  n. 
CUSTOM  OF  MERCHANTS, 

how  this  became  law,  3,  4. 

adopts  fiction,  as  of  common  law,  3. 

law  merchant  a  body  of  custom,  4. 


330  INDEX. 

CUSTOM   OF   ^fERCHANTS,— con^mwerf. 

needing  a  sheriff,  4. 

the  custom  sometimes  overlooked,  5. 
sometimes  overturned,  5,  6. 
CUTTING  IN  TWO, 

negotiable  instrument,  221.  , 

D. 

DAMAGES, 

in  case  of  equities,  257,  358. 

conflict  of  laws  as  to,  281,  283,  284. 
DAYS   OF   GRACE, 

what  these  are,  9. 

origin  of,  9. 

abolished  by  the  Statute,  9. 
DEATH, 

as  excuse  of  presentment,  175,  176,  178. 

as  excuse  of  notice,  178. 
DEFINITIONS, 

'  negotiability,'  9. 

'  promissory  note,'  11. 

'cheque,'  11. 

'  bill  of  exchange,'  11. 

'foreign  bill,'  11. 

'  inland  bill,'  11. 

•maker,'  12. 

'drawer,'  12. 

'payee,'  12,  26. 

'drawee,'  12. 

'indorsee,'  12. 

'bearer,' 25,  26. 

'  money,'  27. 

'  morning '  and  '  night,'  121-123. 

'holder  in  due  course,'  232. 

'alteration,'  181. 

'  bona  fide  holder  for  value,'  232. 
DELIVERY, 

necessary,  13,  15. 

what  constitutes,  13. 

estoppel  to  deny,  13. 

modes  of,  13-15. 

by  intention,  13,  14. 

includes  mistake,  13,  14. 

by  agency,  14. 

custodians  as  agents,  14. 

theft  distinguished,  14,  n. 

by  negligence,  14,  15. 

conditional,  15, 16. 


INDEX.  331 

DELIVERY ,  — continued. 
erroneous  views  of,  16. 
estoppel  as  to,  202-206. 
DEMAND.     (See  Presentment  and  Demand.) 
DEMAND   PAPER, 

when  due  and  when  overdue,  18. 
DESCRIPTIO  PERSONS, 

agents  and  the  like,  43-46. 
DILIGENCE, 

in  fixing  indorser's  liability,  164,  16 
DISCHARGE.     {See  Payment.) 
DISCHARGE   OF   SURETY, 

dealings  with  principal  debtor,  259. 
indorser  as  surety,  259. 
the  Statute,  259,  260. 
surrender  of  securities,  260. 
agreement  for  time,  260-263. 
compositions,  260-263. 
reserving  rights,  261-263. 

release '  a  term  of  double  meaning,  263. 
agreement  to  forbear  necessary,  263. 
taking  further  security,  263-265. 
agreement  must  be  valid,  265. 
made  with  bankrupt,  265. 
request  to  sue,  266,  267. 

accommodation  contracts  distinguished,  267,  268. 
doctrine  of  suretyship  not  fully  applied  to  such,  239,  240. 
agreement  with  stranger,  268. 

ground  of  doctrine  as  to  dealings  with  principal  debtor,  268. 
DRAFT, 

a  term  of  convenience,  11. 
DRAWER'S  CONTRACT, 

distinguished  from  maker's,  70, 

nature  of,  70. 

incidents,  71. 

right  to  draw,  71-75. 

drawing  without  funds,  71-73. 
reasonable  ground  for  drawing,  71-74. 
drawing  on  one's  self,  75. 

corporation  or  partnership  drawing  on  itself,  75. 
drawer  of  cheque,  75-79. 

cheque  not  properly  a  bill  of  exchange,  75. 
differences  between  the  two  as  to  drawer,  75,  76. 
drawer  of  cheque  not  receiving  notice  of  dishonor,  76,  77. 
loss  sustained  by  failing  to  give  notice,  76-78. 
diligence  of  holder,  78. 
keeping  cheque  in  circulation,  78,  79. 
presentment  for  acceptance  of  bills  payable  after  datCi  79-S£ 
conflict  of  laws  as  to  drawer's  contract,  282-284. 


332  INDEX. 

DRAWER'S  SIGNATURE, 

admission  of,  223-225 
DURESS, 

as  an  equity,  252. 

£. 

EPIDEMIC, 

as  excuse  of  presentment,  119,  120. 
EQUITIES, 

distinguished  from  absolute  defences,  200,  201,  232. 

imply  contract,  232. 

domain  of  bona  fide  holders  for  value,  232. 

term  '  bona  fide  holder  for  value,'  233. 

term  '  bona  fide  holder,'  233. 

notice  of,  233-241. 

confusion  of  terms  of  notice,  283-237. 

absolute  notice,  233,  234,  240. 

constructive  notice,  234-239. 

putting  upon  inquiry,  234-239. 

negligence  not  bad  faith,  235,  236. 

reasonable  suspicion  of  wrong-doing,  236,  337. 

purchase  from  trustee,  237,  238. 

statement  of  consideration,  238. 

misuse  of  partnership  name,  238. 

potential  equity,  239. 

knowledge  of  equities,  240. 

notice  in  sense  of  knowledge,  240,  n. 

forms  of  absolute  notice,  240,  241. 

information  of  equity,  240. 
term  '  holder  for  value,'  241-250. 

complement  of '  bona  fide  holder,'  241. 

valuable  consideration,  241-250. 

conflict  of  authority  in  regard  to  taking  for  pre-existing  debt,  242- 
247. 

'valid  '  consideration,  242. 

New  York  doctrine,  243,  244. 

doctrine  of  federal  courts,  244,  245. 
of  English  courts,  246. 

subject  considered  in  principle,  246,  247. 

creditor  taking  as  agent  or  bailee,  247. 

taking  accommodation  paper  for  pre-existing  debt,  248. 

forbearance,  248. 

implication  of  agreement  to  forbear,  248. 

parting  with  rights,  249. 

conditional  payment  and  collateral  security,  249. 

paper  taken  in  absolute  payment,  249,  250. 

newly  created  debt,  250. 
existence  of  equities,  how  shown,  250-257. 


INDEX.  333 

EQUITIES  —  continued. 

existence  of  equities,  —  continued. 

fraud,  duress,  and  illegality,  250-252. 
these  a  presumptive  defence,  251. 
other  equities,  252,  253. 
subsequent  notice,  253. 
what  meant  by  equities,  254. 
accommodation  paper,  254. 
fraudulent  diversion  thereof,  254,  255. 
filling  blank  spaces  in  instrument,  255. 
set-off,  256. 
holder  with  notice  or  without  value  taking  from  bona  fide  holder  for 

value,  256,  257. 
amount  of  recovery,  257,  258. 

buying  paper  outright,  257,  258. 
taking  paper  as  security,  258. 
ESTOPPEL, 

law  merchant  as  supposed  example  of,  6,  7. 
in  cases  of  delivery,  202-206. 
in  cases  of  alteration,  219. 
acceptor's  estoppel,  223-225. 
EVIDENCE, 

certificate  of  protest  as,  129-133. 

as  to  liability  of  indorser,  5,  6,  104. 

indorser's  competency  as  witness  for  another  party,  to  impeach  paper. 

101, 102. 
to  control  indorsement,  102-104. 
EXCUSE  OF  NOTICE, 
temporary,  118-120,  166. 
waiver  or  excuse  of  presentment,  177. 
notice  not  lightly  dispensed  with,  177. 
insolvencj'  of  maker  or  acceptor,  178. 
knowledge  of  facts  waived,  179. 
drawing  a  bill  without  reason,  179. 
drawing  on  one's  self,  179. 
EXCUSE   OF  PRESENTMENT, 
temporary,  118-120. 
waivers,  172. 
refusal  to  pay,  173. 
excuse  of  presentment  alone,  173. 
excuse  of  demand,  173. 

excuse  of  both  presentment  and  demand,  173-175. 
removal,  173-175. 
absconding,  174. 
insolvency,  175. 

waiving  notice  of  dishonor,  175. 
death  of  maker  or  acceptor,  176 
EXCUSE  OF  PROTEST, 
as  to  foreign  bills,  175,  176. 


334  INDEX. 

EXCUSE   OF  TROTEST,  — continued. 
as  to  inland  bills,  175,  176. 
as  to  promissory  notes  and  cheques,  175,  176. 


FICTIONS, 

by  which  foreign  bills  were  adopted,  3,  4. 
FICTITIOUS   PAYEE,  26. 
FORBEARANCE, 

agreement  for,  as  a  discharge  of  surety,  260-263. 
FOREIGN  BILLS, 

how  adopted  into  the  law,  3,  4. 

defined,  11. 

protest  of,  129-131. 
FORGERY, 

of  indorsement,  222,  223. 

of  drawer's  signature,  223-226. 

acceptor's  estoppel,  223-226. 
FRAUD, 

as  an  absolute  defence,  205,  206. 

in  form  of  misrepresentation,  205,  206, 

as  an  equity,  251,  252,  254,  255. 
FRAUDULENT   DIVERSION, 

of  accommodation  paper,  254,  265. 

FUNDS, 

drawing  on  particular,  32,  3S. 
drawing  without,  71,  74. 

6. 

GENUINENESS, 

admission  or  warranty  of,  98-101 ,  223-226. 
GRACE, 
origin,  9. 
abolished,  19. 

time  of  presentment,  115-117. 
in  case  of  guaranty  and  suretyship,  195. 

(See  Presentment  and  Demand.) 
GUARANTY  AND   SURETYSHIP, 
guaranty  as  indorsement,  93,  94. 
accommodation  party  a  surety  sub  modo,  185,  186. 
distinction  between  guaranty  and  suretyship,  188,  189. 
guaranty  in  specific  sense,  189-195. 
consideration,  190-193. 

guaranty  at  time  of  principal  contract,  190. 
guaranty  afterwards,  191. 
Statute  of  Frauds,  191,  192. 


INDEX,  535 


GUARANTY  AND   SURETYSHIP,  —  con^muetf. 
negotiability  of  guaranty,  192-195. 

of  bonds,  195,  n. 
grace,  195. 

presentment  and  notice,  195. 
suretyship  in  specific  sense,  195,  196. 
discharge  of  surety,  259-268. 

indorser  a  surety,  259. 

the  Statute,  259,  260. 
surrender  of  securities,  260. 
agreement  for  time,  260-263. 

presumptive  effect,  261,  262. 

reservation  of  rights,  261-263. 

release  in  technical  sense,  263. 

mere  indulgence,  263. 

taking  further  security,  263-265. 

valid  agreement  for  time,  265. 

limits  of  right  of  reservation,  266. 
request  to  sue,  266-267. 
accommodation  contracts,  267,  268. 
agreement  with  stranger,  268. 
ground  of  doctrine,  268. 


H. 

HOLDER'S  POSITION, 

right  to  sue  mediate  party,  198,  199. 

presumptive  right  of  holder,  198. 

absolute  defences  distinguished  from  equities,  200,  201 
HONOR, 


acceptance  for,  61-63. 
payment  for,  276,  277. 


IGNORANCE  OF  FACT, 

in  waiver,  169,  170. 
IGNORANCE  OF  LAW, 

in  waiver,  169,  170. 
ILLEGALITY, 

an  absolute  defence,  229-231. 
INDORSEMENT, 

what  constitutes,  83,  84. 
of  unnegotiable  instrument,  84,  85. 
who  may  or  must  indorse,  84-89. 
by  the  holder,  84. 
by  stranger,  84. 
instruments  to  order,  84. 
to  bearer,  84,  85. 


n 


336  INDEX. 

INDORSEMENT,  —  conh'n«e(f. 

who  may  or  must  indorse,  —  continued. 

note  to  maker's  own  order,  85,  n. 

unnecessary  indorsement  may  be  struck  out,  85. 

delivery  without  indorsing  paper  payable  to  order,  85. 

indorser's  own  name  not  used,  86. 

holder  having  legal  title  should  indorse,  86. 

in  cases  of  partnership,  87,  88. 
death  of  partner,  87,  88. 
dissolution  not  by  death,  88. 

by  agent,  88,  89. 
partial  indorsement,  89,  90. 
modes  of,  90-95. 

special  indorsement,  90. 

converting  blank  into  special,  90. 

restrictive,  91. 

conditional,  91. 

with  waiver,  92. 

joint  indorsement,  92. 

should  conform  to  custom,  92,  93. 

irregular  indorsement,  93. 

in  form  of  guaranty,  93,  94. 

construction  of  language,  94. 
as  an  order,  95,  96. 

how  far  equivalent  to  drawing  bill,  95,  96. 
order  of  liability,  96,  97. 

presumptive,  96,  97. 
nature  of  contract,  97. 
incidents  of  contract,  98-102. 

admission  or  warranty  of  genuineness,  98-101. 

uncertainty  of  the  cases,  98,  99. 

the  Statute  not  clear,  99,  100. 

warranty  negotiable,  101. 

competency  of  indorser  to  impeach  the  contract,  101,  102. 
apparent  but  not  real  indorsement,  inter  partes,  102-104. 

evidence  to  control  indorsement,  102-104. 

parol  evidence  rule  wrongly  applied,  104. 
presentment  and  demand,  105-108. 

distinction  between,  105. 

presentment,  what  is,  105. 

demand,  what  is,  105. 

when  presentment  required,  106. 

equivalents,  106-108. 

paper  payable  at  bank,  106,  107. 

knowledge  of  bank,  107. 
paper  lodged  in  bank  for  collection,  107. 
demand  in  sucli  case,  107,  108. 
place  of  presentment,  108-112. 

payable  at  bank  or  not,  108. 


INDEX.  33 

INDORSEMENT,  —continued. 

place  of  presentment,  —  continued. 
payable  at  branch  banks,  109. 
drawee  may  name,  109. 
payable  generally,  109. 

place  of  business,  110. 

place  of  residence.  111. 
removal  of  maker  or  acceptor,  111,  112. 
place  of  date,  112. 
time  of  presentment,  113-123. 

presentment  for  acceptance,  113. 
bills  payable  after  date,  113. 

after  sight,  113-115. 
paper  indorsed  after  maturity,  115u 
grace,  115-117. 

how  to  reckon,  116,  117. 

the  Statute  abolishes,  117. 
legal  obstacle,  118-120. 

inevitable  accident,  118,  119. 

existence  of  war,  119. 

epidemic,  119,  120. 

death  of  maker  or  acceptor,  120. 
time  of  day  for,  121-123. 

payable  at  bank  or  house  having  business  hours,  121. 

payable  generally,  121-123.    . 
presentment,  by  whom,  123-126. 

by  one  not  entitled  to  payment,  123,  124. 
death  of  holder,  124. 
act  of  notary,  125. 

of  deputy,  125. 
presentment,  to  whom,  126-128. 

death  of  maker  or  acceptor,  126. 

bankruptcy,  126. 

signature  as  '  agent,'  127. 

instrument  signed  by  two  or  more,  127,  128. 

death  of  one,  127. 

several  undertaking,  127,  128. 
protest,  129-133. 

of  foreign  bills,  necessary,  129. 

of  inland  bills,  notes,  and  cheques,  permitted,  129. 

act  of  notary  or  '  respectable  resident,'  129. 

how  made,  129. 

distinguished  from  other  steps,  129. 

no  form  of  words  prescrilied,  130. 

if  certain  facts  appear,  130. 

of  foreign  bills  the  evidence  of  dishonor,  130,  131. 

certificate  should  therefore  be  complete,  131. 

statements  in,  not  conclusive,  131. 

American  States  foreign  to  each  other,  131. 

22 


T 


338  INDEX. 

^n  INDORSEMENT,  — confmuerf. 

protest,  —  continued. 

of  inland  bills,  notes,  and  cheques,  132,  13S. 

not  on  footing  of  protest  of  foreign  bills,  132. 

may  be  supplemented,  132. 

apart  from  statute,  no  evidence  of  dishonor,  132,  n. 
time  of  protest,  133. 
•noting,'  133. 
where  to  be  done,  133. 
of  lost  instruments,  133. 
notice  of  dishonor,  133-144. 

presumptively  necessary,  133. 

knowledge  is  not  notice,  133,  134. 

form  of  notice,  134,  135. 

may  be  oral,  134. 

need  not  be  signed,  134. 

may  be  supplemented,  134. 

mistakes  in,  134,  135. 

of  non-payment,  whether  good,  135-141. 

conflict  of  authority,  135. 

English  authorities,  135-138. 

American  authorities,  138-141 
the  Statute,  141, 

informing  indorser  to  be  ready,  141,  142. 
notice,  by  whom,  142-144. 

by  holder,  agent,  or  indorser,  142,  US. 

by  stranger,  142. 

inurement  of  notice,  143,  144,  150,  151. 

by  acceptor  or  maker,  144. 
notice,  to  whom,  145,  146. 

joint  indorsers,  145. 

death  of  indorser,  145,  146. 

bankruptcy,  146. 
notice,  how  given,  146-151. 

reasonable  despatch,  146. 

use  of  mail,  147-149. 

mailing  notice  enough,  when,  148,  149. 

agent  treated  as  holder,  150. 

use  of  messenger,  150. 

notice  to  indorsers  in  succession,  150. 

inurement  of  notice,  150,  151. 
notice,  when,  151-157. 

presumptive  time,  151. 

reasonable  diligence,  151,  152,  154,  156. 

non-secular  days,  152. 

party  notifying  and  party  to  be  notified  residing  in  different 
places,  152. 
in  same  place,  152. 

several  indorsements  in  succession,  152, 153. 


iNDica.  339 


INDORSEMENT,  —  continued. 

notice  of  dishonor,  —  continued. 
notice,  when,  —  continued. 

one  day  for  giving  notice,  meaning  of,  153,  154. 

mode  of  reckoning,  154,  155. 

time  allowed  indorser  for  giving  notice,  155,  156. 

notice  sent  on  non-secular  day,  156. 

agent  treated  as  holder,  156. 

indorsement  after  maturity,  157. 
notice,  wiiere,  157-164. 

residence  of  parties,  157,  158. 

personal  notice,  158. 

different  addresses  of  indorsers,  158-160. 

no  post-office  wliere  indorser  lives,  160. 

removal  of  indorser,  160-163. 

temporary  absence  of  indorser,  161,  162. 

making  inquiry,  162,  163. 

place  of  date,  163,  164. 
diligence,  164,  165. 
temporary  excuse  of  steps,  166. 
permanent  excuse,  167-172. 

waiver,  and  its  meaning,  167-170. 

promise  to  pay,  167. 

of  protest,  168,  169, 

after  maturity,  169,  170. 
excuse  other  than  waiver,  170-172. 

transfer  of  funds,  170,  171. 

indorser  as  primary  debtor,  171,  172. 
loss  of  instrument,  172. 
excuse  of  presentment,  172-176. 

as  distinguished  from  demand,  172,  178. 

effect  of  removal,  173-176. 

absconding,  174. 

insolvency,  175. 

waiver  of  notice,  176. 

death  of  maker  or  acceptor,  175,  176. 

the  Statute,  176. 
excuse  of  protest,  176,  177. 

whether  it  includes  all  steps,  176,  177. 
excuse  of  notice,  177-180. 

narrow  effect  of,  177,  178. 

insolvency  of  maker  or  acceptor,  178. 

knowledge  of  facts,  179. 

drawer  of  bills  and  cheques,  179. 

the  Statute,  179,  180. 
forged  indorsement,  222,  223. 

chain  of  title,  222. 

nominal  exceptions,  222,  223. 
INEVITABLE   ACCIDENT, 

SB  excuse  of  presentment,  166,  172,  175. 


340  INDEX. 

INLAND  BILL, 

defined.  IL 

protest  of,  129,  132,  133. 
INSOLVENCY, 

as  excuse  for  presentment,  175. 

as  excuse  of  notice,  178. 
INSTALMENTS, 

payment  bj',  38. 
INUREMENT, 

notice  of  dishonor  by,  143,  144. 


JOINT    CONTRACT, 

doctrine  of,  fastened  upon  law  merchant,  5. 


K. 

KNOWLEDGE   OF  DISHONOR, 

distinguished  from  notice,  133,  134,  142,  240,  n. 
KNOWLEDGE   OF   EQUITIES, 

distinguished  from  notice,  240. 


L. 

LAW  MERCHANT, 

its  relation  to  common  law,  1-10. 

an  importation,  1. 

how  admitted  to  English  law,  2-4. 

how  considered  by  common  law  judges,  4-6. 

not  a  dependent  of  the  common  law,  6. 

estoppel  analogous  to  negotiability,  but  not  the  same  thing,  9, 10. 

law  merchant  adopts  common  law  defences,  17. 
LAWS,   CONFLICT  OF.    {See  Conflict  of  Laws.) 
LOST  INSTRUMENTS, 

protest  and  other  steps,  133,  172. 


M. 


MAIL, 

notice  by,  147-149,  158-160. 
MAKER'S   CONTRACT, 
how  executed,  40. 
place  of  signature,  40,  41. 
joint  and  several  note,  41-43. 
nature  of  joint  promise,  41,  42 
nature  of  several  promise,  42. 
promise  by  partners,  42. 


INDEX.  341 


MAKER'S    CONTRACT,  — conhnuerf. 

promise  of  surety,  43. 

signing  as  '  agent '  and  the  like,  43-46. 

anomalous  undertaking  of  stranger,  46-49. 
MARGINAL  TERMS, 

removal  of,  221. 
MARK, 

signing  by,  38,  39. 
MATURITY, 

when  reached,  17-19. 

when  passed,  18. 

of  instrument  payable  on  demand,  18. 

when  suit  can  be  brought,  18,  19. 

hastening  maturity,  19,  n. 

presentment  at,  115. 
MESSENGER, 

notice  of  dishonor  by,  160. 
MISTAKE, 

delivery  by,  13,  14. 

as  excuse  of  presentment,  166. 

alteration  of  paper  by,  210-214. 
MONEY, 

statute  of  Anne,  4,  27. 

payment  in,  27. 

what  meant  by  money,  27. 

'  in  cotton,'  27. 

'  in  good  East  India  bonds,*  27. 

'in  carpenter's  work,'  27. 

'  in  current  funds,'  27. 

'  in  Canada  money,'  28. 

'  in  current  bank  notes,'  27,  n. 

*in  good  current  money,'  27,  n. 

'in  Arkansas  money,'  27,  n. 

what  the  courts  will  know  as  equivalent  to  money,  28. 

exceptional  rule  in  some  States,  28. 
'  MORNING,' 

as  to  presentment,  121-123. 
MORTGAGE, 

passes  with  mortgage  note,  196. 

equities  as  to,  196. 

N. 

•NEED,' 

acceptance  in  case  of,  62. 
NEGLIGENCE, 

in  delivery,  14,  15,  202-206. 
facilitating  alteration,  217-221. 

(AS'ee  Absolute  Defences.  J 


342  INDEX. 

NEGOTIABILITY, 
meaning  of,  9,  10. 
estoppel  an  analogy  only,  1,  10. 
how  manifested,  10. 
effect  of  seal,  10. 
of  certificate  of  deposit,  10,  n. 
of  guaranty,  192-195. 
non-existing  payee,  26. 
•NIGHT,' 

as  to  presentment,  121-123. 
NOTARY, 

protest  by,  125,  129. 
deputy  of,  125. 
absence  of,  125,  126. 
NOTICE   OF  DISHONOR, 
form  of,  133-141. 
no  form  of  words  prescribed,  134. 
of  what  indorser  should  be  apprised,  134,  1.35. 
notice  of  non-payment  merely,  135-141. 

course  of  English  authority  as  to  such  notice,  136-138, 

course  of  American  authority,  138-141. 

paper  payable  at  bank  distinguished,  139,  140. 

purpose  of  notice,  140,  141. 

the  Statute,  141. 
notification  that  indorser  is  looked  to  for  payment,  141,  142. 
notice  by  whom,  142. 

by  holder  or  agent,  or  by  indorser  bound  to  pay,  142. 

notice  by  stranger,  142,  143. 

notice  by  indorser,  143. 

notice  by  acceptor  or  maker,  144. 
Dotice  to  whom,  145,  146. 

to  indorser  or  agent,  145. 

death  of  indorser,  145,  146. 

death  of  partner  indorser,  146. 
notice,  how,  146-151. 

direct  and  e.xpeditious  mode,  146,  147. 

by  mail,  147-149. 

personal  notice,  150. 

messenger,  150. 

successive  notices,  150. 

inurement,  150,  151. 
notice,  when,  151-157. 

on  day  of  dishonor  or  day  after,  151. 

diligence,  151,  154,  155,  165,  166. 

non-secular  days,  152. 

departure  of  mail,  152 

several  successive  indorsements,  152,  153. 

whether  holder  has  entire  day,  153, 154 

notice  by  indorser,  time  of,  155,  156. 


INDEX. 

NOTICE  OF  DISHONOR,— conttnuerf. 
notice,  when,  —  continued. 
notice  on  Sunday.  156. 
agent,  156. 

paper  indorsed  after  maturity,  157. 
notice,  where,  157-164. 
personal  notice,  158. 
by  mail,  158. 

several  post-offices  in  indorser's  town,  158-160. 
post-office  address,  158-160. 
no  post-office  in  indorser's  town,  160. 
removal  of  indorser,  160. 
absence  from  home,  161,  162. 
making  inquiry,  162,  163. 
place  of  date,  163,  164. 
diligence,  164,  165. 
excuse  of  notice,  177-180. 

conflict  of  laws  as  to  notice  of  dishonor,  282,  283. 
NOTICE  OF  EQUITIES.    (See  Equitibb.) 
'  NOTING,' 

as  to  protest,  133. 

o. 

•ON  OR  BEFORE,' 

accelerating  payment,  30,  36. 
ORDER, 

need  of,  for  bill  of  exchange  or  cheque,  22, 3S. 

Word  '  order '  not  required,  22. 


P. 

PAROL  EVIDENCE  RULE, 

applied  to  law  merchant,  6,  6,  104- 

law  merchant  has  its  own  rule,  6. 
PARTICULAR   FUND, 

paper  payable  out  of,  32. 
PARTIES, 

to  bills,  notes,  and  cheques,  12,  13. 

maker  and  drawer  distinguished,  12. 

primary,  12. 

secondary,  12. 

necessary  parties,  23. 

joint  and  several,  41-43,  127,  128. 
PARTNERS, 

promise  by,  42. 

indorsement  by,  87,  88. 

death  of  partner  indorser,  87,  88,  146. 

dissolution  of  partnership  not  by  death,  88. 


343 


344  DJDEX. 

PAYEE, 

who  may  be,  23,  26. 
certainty  of,  24. 

may  be  ascertainable  by  evidence  ab  extra,  24. 
two  or  more  payees,  24,  25. 
'  cashier,'  25,  26. 

fictitious  or  non-existing  payee,  26. 
capacity  of,  98-102. 
PAYMENT, 

in  money,  27,  28. 

on  or  before  a  certain  time,  30,  36,  37. 
certainty  of  time  of,  35-38. 
place  of,  named,  35. 
alternative  time  of,  38. 
by  instalments,  88. 
paper  taken  in  conditional,  243-247. 
when  it  extinguishes  all  liabiUty,  269. 
of  unnegotiable  paper,  269. 
the  Statute,  269,  270. 
renunciation,  270. 
presumptions  of,  270-272. 
removals,  272. 

surrender  of  paper,  272,  273. 
should  be  made  at  the  right  time,  274, 
to  the  right  person,  274. 
by  the  right  person,  275,  276. 
who  is  meant  by  the  right  person,  275,  270. 
payment  for  honor,  276,  277. 

not  a  matter  of  custom  here,  276. 
the  Statute,  276,  277. 
PENCIL,         a=— 
signature  in,  38. 
POST-OFFICE, 

notice  of  dishonor  hhfeutfi,  147-149,  158-160. 
several  post-offices  in  same  town,  158-160. 
no  post-office,  160. 
PRE-EXISTING   DEBT, 

as  a  valuable  consideration,  243-247. 
PRESENTMENT   AND   DEMAND, 

presentment  for  acceptance,  79-82,  113. 

drawer  contracts  for  acceptance,  79,  80. 
refusal  of  acceptance,  80,  81. 
rule  in  Pennsylvania,  81. 
the  Statute,  81,  82. 
distinction  between  presentment  and  demand,  106. 
presentment,  what,  105. 
demand,  what,  105. 
why  presentment  required,  106. 
equivalent  acts,  106-108. 


INDEX.  346 


PRESENTMENT  AND  DEMAND,  —  conftnuerf. 
presence  of  paper  in  bank,  107. 
demand  and  equivalents,  107,  108. 
place  of,  108-112. 

paper  payable  at  place  named,  108,  109. 
drawer  may  designate  place,  109. 
paper  payable  generally,  109. 
bank  with  branches,  109. 
place  of  business,  110,  111. 
place  of  residence,  111. 
removal.  111,  112,  173,  174. 
date  as  evidence  of  place,  112. 
time  of  presentment,  113-12.3. 

in  case  of  presentment  for  acceptance,  113-116. 
bills  payable  after  date,  113. 
bills  payable  at  or  after  sight,  113,  114. 
indorsement  after  maturity,  115. 
presentment  for  payment,  115-123. 

at  maturity,  115. 

where  grace  is  excluded,  116. 

with  grace,  116,  117. 

how  grace  is  reckoned,  116,  117. 

instalment  notes,  117. 
obstacle  to  presentment,  118-120. 

what  constitutes  an  obstacle,  118. 

inevitable  accident,  118,  119. 

existence  of  war,  119. 

epidemic,  119,  120. 

death  of  maker,  120. 
time  of  day  of  making  presentment,  121-123. 

hours  of  business,  121,  122. 

'morning'  and  'night,'  121-123. 
presentment,  by  whom,  123-126. 
by  holder  or  his  agent,  123. 
by  one  not  entitled  to  receive  payment,  123,  124. 
death  of  holder,  124. 

foreign  bills  often  have  double  presentment,  125i 
action  of  notary  in  case  of  foreign  bill,  125. 
notary's  deputy,  125. 
absence  of  notary,  125,  126. 
presentment,  to  whom,  126-128. 

to  maker  or  acceptor,  or  to  his  agent,  126. 

death  of  maker  or  acceptor,  126. 

bankruptcy  of  maker  or  acceptor,  126. 

maker  as  '  agent,'  127. 

two  or  more  makers  or  acceptors,  127,  128. 

joint  parties,  127,  128. 

partners,  127. 

death  of  one  of  the  joint  parties,  127. 


346  INDEX. 

PRESENTMENT  AND  DEMAND.— coTifinuaA 

presentment,  to  whom,  —  continued 

several  makers  or  acceptors,  127,  128. 

conflict  of  laws  as  to  presentment,  282. 
PRESUMPTION, 

of  payment,  270-272. 

from  fraud,  duress,  or  illegality,  251,  262. 
PROMISE, 

need  of,  for  promissory  note,  21,  22. 

word  'promise'  not  required,  21. 

equivalents  of '  promise,*  21,  22. 

to  accept,  63-66. 
PROMISE  TO  ACCEPT, 

called  '  virtual  acceptance,'  63-66. 

before  and  after  the  bill,  63. 

a  contract  of  the  common  law,  64 

not  of  the  law  merchant,  64. 

nature  of,  64. 

terms  of,  64. 

should  identify  the  bill,  64. 

who  may  act  upon,  65,  66. 

incidents,  66. 
PROMISSORY  NOTE, 

defined,  11. 
PROTEST, 

by  notary,  125,  129.      \^ri___j!^^Z^^''— 

by  deputy,  125. 

absence  of  notary,  125,  126. 

by  '  respectable  resident,'  129. 

in  case  of  foreign  bill,  129-131. 

how  manifested,  129. 

no  form  of  words  prescribed,  130. 

what  facts  should  appear,  130. 

certificate  of  protest  as  the  evidence  of  dishonor,  130-132> 

States  of  the  Union  foreign  to  each  other,  131. 

protest  of  inland  bills  and  promissory  notes,  132. 

not  necessary,  132. 

permitted  by  statute,  132. 

certificate  as  evidence,  132. 
when  to  be  made,  132,  133. 
•noting,'  133. 

conflict  of  laws  as  to  protest,  282. 
PUTTING   UPON   INQUIRY, 
as  notice  of  equities,  233-239. 


QUASI-ACCEPTANCE,  57-66.     {See  Acceptawcb.) 


INDEX  347 


REASONABLE  GROUND, 

for  drawing  bill,  71-75. 

for  drawing  cheque,  75. 
REASONABLE   TIME,  37. 
RELEASE  AND  COMPOSITION, 

effect  on  surety,  260-263. 

reservation  of  rights,  261-26b. 
REMOVAL, 

as  excuse  of  presentment,  111,  112,  173, 174 
RENUNCLATION,  270. 


s 

SATURDAY, 

as  part  holiday,  117. 
SEAL, 

effect  on  negotiability,  10. 
SET, 

bills  in,  11,  12. 
SET-OFF, 

not  an  equity,  256. 
SIGNATURE, 

may  be  in  pencil,  38. 

by  mark,  38. 

in  cipher  or  the  like,  38,  39,  n 

signature  required,  39. 

omission  of,  39. 

of  maker,  40. 

may  be  anywhere  on  the  paper,  40,  41. 

out  of  usual  place,  40,  41. 

joint  and  several,  41-43. 

as  surety,  43. 

as  agent  or  representative,  43-46. 

anomalous  signature  of  stranger,  46-49. 

admission  of  drawer's,  98-101,  223-226. 

acknowledging  signature,  226. 
STATES, 

foreign  to  each  other,  131. 
STATUTE, 

paper  void  by,  229-231. 
STATUTE   OF   ANNE,  4,  27. 
STATUTE   OF  FRAUDS, 

oral  acceptance,  58,  59. 

as  to  contract  of  guarantor  or  suretj,  191, 10ft 
STATUTE   OF  LIMITATIONS, 

an  absolute  defence,  231. 


348  INDEX. 

STRANGER, 

notice  of  dishonor  by,  142. 

alteration  of  instrument  by,  216. 
SUM   PAYABLE, 

must  be  certain,  29-31. 
SUNDAY, 

last  day  of  grace,  116,  117. 

notice  of  dishonor  may  be  sent  on,  156- 
SUPRA  PROTEST, 

acceptance,  61-63. 

for  better  security,  6l,  62. 

payment,  276,  277. 
SURETY, 

promise  of,  43. 
SURETYSHIP.    {See  Guaranty  and  Scretyship.) 
SURRENDER  OF  PAPER, 

on  payment,  272,  273. 
SUSPICION, 

of  defence,  turning  away,  236,  237. 


TELEGRAPH,      ^ ^ 

acceptance  by,  57,  66,  n.       /Sit 
TELLER  OF  BANK,  J^J 

power  of,  to  certify  cheques,  68. 
THEFT, 

of  negotiable  instrument,  14,  n.,  203,  220,  n. 
TIME   OF   PAYMENT, 

accelerating,  31. 

certainty  of,  35-38. 
TREASURER, 

signing  as,  43,  46. 
TRUSTEES, 

exempting  themselves  from  liability,  44-4(< 


U. 


UNNEGOTIABLE   PAPER, 
indorsement  of,  84,  85. 
payment  of,  269. 


'VALID  '   CONSIDERATION,  242. 
VALUABLE   CONSIDERATION, 
term  explained,  241-250. 


INDEX. 


349 


VENDOR'S  CONTRACT, 

transfer  by  delivery  or  without  recourse,  181. 
nature  and  incidents,  181. 
warranty,  182. 

not  negotiable,  182. 

transfer  for  security,  182. 

of  solvency,  182. 

warranty  presumptive  only,  183. 

by  brokers  and  other  agents,  183. 
'VIRTUAL  ACCEPTANCE,'  63-66.     {See  Promise  to  Accept.) 


W. 

WAIVER.     (See  Excuse  of  Notice;  Excuse  of  Presentment.) 

WAR, 

as  excuse  of  presentment,  119. 

WARRANTY, 

by  indorsement,  98-101. 

by  acceptance,  223-225. 
•  WITHOUT  RECOURSE,'  6,  16,  87,  n. 
WORDS,     (^ee  Definitions.) 
WRITING, 

bills,  notes,  and  cheques  must  be  written,  20. 

law  merchant,  not  statute,  so  requires,  20. 

no  particular  writing  material  required,  20,  21. 

in  pencil  proper,  21. 


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